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Criminals are dropping bitcoin in favor of other digital currencies that are harder for law enforcement to use in tracking activities in an anonymous corner of the internet known as the dark web, analysts said.

Although hard numbers on criminal activity in digital currencies are difficult to pin down, Shone Anstey, co-founder and president of Blockchain Intelligence Group, estimates that illegal transactions in bitcoin have fallen from about half of total volume to about 20 percent last year.

"Now it's significantly less than that," he told CNBC earlier this month, noting that overall transaction volume has grown globally.

A U.S. Homeland Security official confirmed to CNBC in a phone interview on Thursday that criminals are "looking more closely at other currencies like monero and ethereum."

"What the criminals are starting to see, and some of the trends we're picking up as well, is that bitcoin also works equally just as much against you as it does for you," said the official, who didn't want to be named.

Ethereum cybercrime revenue in $ millions

Source: Chainalysis

Bitcoin is built on the blockchain, a public record of all transactions available online. Users also need a public address of numbers and letters in order to receive payments. As a result, intelligence agencies can track the movement of funds to addresses that hackers provide and catch the criminals when they try to cash out through more regulated entities such as exchanges or banks.

Jonathan Levin, co-founder of blockchain analytics firm Chainalysis, noted that recent law enforcement crackdowns have "made a dent in the trust" in dark web markets, where people primarily use cryptocurrencies for payment.

On July 20, the U.S. Justice Department and Europol announced the closure of two of the largest dark web marketplaces, AlphaBay and Hansa, which listed tens of thousands of vendors selling illegal drugs, counterfeit identification documents and other illicit products.

The DOJ said AlphaBay transactions used bitcoin, monero and ethereum, while Europol estimated a minimum of $1 billion in transactions on AlphaBay since its launch in 2014.

A few days later, a grand jury in the U.S. District Court for the Northern District of California charged Russian national Alexander Vinnik and the digital currency exchange he allegedly operated, BTC-e, with money laundering and related crimes. Once a major exchange, the BTC-e website now shows it's been seized by U.S. authorities.

Screenshot of BTC-e landing page

"We're getting a lot better through law enforcement tracking those [criminals] and holding the exchanges more accountable," the Homeland Security official said. "I think [bitcoin]'s a lot more legitimate than people give it credit for."

The average number of daily bitcoin transactions has climbed to 224,000 so far this month from around 206,000 last August, according to data from the Blockchain website. Daily trade volume in bitcoin has multiplied rapidly in the last year, climbing to an average of $2 billion so far this month from an average $86.7 million last August, according to CoinMarketCap data.

Bitcoin has more than quadrupled in value this year, to hit a record high of more than $4,700 on Tuesday.

Daily confirmed bitcoin transactions by seven-day average (2009 - 2017)

Source: Blockchain.info

In the last three years, new digital currencies such as monero have emerged in an effort to increase privacy. Unlike the open transaction record of bitcoin, monero's technology hides the name of the sender, amount and receiver.

A representative from monero did not respond to email and Twitter requests for comment.

Monero hit a record high Monday of $154.58, up more than 1,000 percent this year, according to CoinMarketCap.

Digital currency ethereum is an increasing target for cybercrime as well, according to Chainalysis. Ethereum is up about 4,300 percent this year amid a flood of funds into the digital currency for initial coin offerings, which have raised the equivalent of nearly $1.8 billion in the last three years, CoinDesk data showed.

Cybercriminals raised $225 million in ethereum so far this year, Chainalysis said in a report posted Aug. 7 on its website. Phishing attacks disguised emails or other communication used to trick people into disclosing personal information make up more than half of all ethereum cybercrime revenue this year at $115 million, the study said.

The Ethereum Foundation did not return a CNBC request for comment.

That said, analysts pointed out that bitcoin is still favored by many criminals since its relatively more widespread use makes it easier for them to quickly convert the digital currency to cash without any intermediary.

The sharp gains in bitcoin's price have also made it more attractive for hackers in recent high-profile attacks such as WannaCry, though analysts estimate the criminals have only received tens of thousands to a few hundred thousand U.S. dollars' worth of bitcoin.

"Bitcoin basically introduced a situation where we could bypass the money mules," said Rickey Gevers, cybercrime specialist at RedSocks Security, which detects and fights against malware.

But, Gevers said, "in the beginning [bitcoin] looks very anonymous, and in the end it doesn't look very anonymous."

Wall Street is increasingly interested in bitcoin. More investment funds are opening and the U.S. Commodity Futures and Trading Commission is allowing bitcoin options to begin trading. Switzerland's financial markets regulator in mid-July also approved Falcon Private Bank as the first Swiss private bank for bitcoin asset management.

"The whole use issue of digital currencies has become a big industry. Bitcoin isn't this weird, odd currency that's being used on the dark web," said Paul Triolo, practice head of geotechnology at consulting firm Eurasia Group. "Since the early days of bitcoin on some [levels], the world has changed quite a bit."

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Dark web finds bitcoin increasingly more of a problem than a help, tries other digital currencies - CNBC