CoinDesk sat down with Chainalysis’ chief economist Philip Gradwell to get a macro-view of the crypto market.

Speaking at Invest: NYC 2019, Gradwell said the crypto-sleuthing firm has found that only 30 percent of bitcoin is actually liquid. Of this value exchanged, more and more of it is going towards legitimate merchant services, a departure from crypto’s first use case: “buying drugs on the Silk Road.”

“In recent months there has been a lot of disruption to [dark] markets, law enforcement has taken down a number of those sites. That’s actually reduced their size in the overall crypto economy,” Gladwell said.

One notable example was the investigation and closure of Welcome to Video, the world’s largest child exploitation site, according to Gladwell. Chainalysis participated in the global cooperative effort to shutter the site and arrest the alleged perpetrators, by analyzing crypto transactions used to pay for child pornography.

“We were able to help the [IRS and Homeland Security] understand were the bitcoin came from or where it got cashed out to,” Gradwell said. “You shouldn’t underestimate the amount of non-blockchain investigations,” that contributed to the effort, he added.

Gradwell also addressed how law enforcement might respond to the distribution of privacy-protecting coins, such as Zcash, as well as the open industry debate as to how much personally identifiable information exchanges should keep under Financial Action Task Force’s “Travel Rule.”

“The industry needs to work out what the right solution is,” Gradwell said.