I don't think it's on the decline, but it's use for legit stuff is on the rise so overshadows the bad stuff.
I think if anything using bitcoin for illegal purposes (like buying drugs online) is on the rise over the medium term. Ever since Ross got arrested, many more people have discovered that it is possible to do this and have started to do so.
I think if anything, the FBI actually made the market and potential for profits of drug dealers on the "deep web" much bigger by arresting Ross and shutting down Silk Road 1.