Bitcoin Slides as Crypto Markets Face Turbulence After Yearn Finance Exploit

Bitcoin extended its decline in early Asian trading on Monday, opening the new month with heightened volatility across the cryptocurrency market. A major disruption at DeFi protocol Yearn Finance triggered renewed fears over liquidity, accelerating losses in Bitcoin and sending shockwaves throughout the altcoin space.

Drops Over 5% as Market Reacts to Yearn Finance Incident

Bitcoin fell 5.3% to $86,075 by 01:07 ET (06:07 GMT), after touching an intraday low of $85,638. The sharp dip follows a challenging November in which the cryptocurrency declined more than 16%. The imbalance deepened as traders reacted to breaking news that Yearn Finance was investigating an incident involving its yETH liquidity pool.

Initial assessments revealed that a flaw allowed an attacker to mint an extremely large quantity of yETH tokens, effectively flooding the pool with illegitimate supply. The exploit essentially enabled the creation of tokens “out of thin air,” undermining trust in the pool’s backing assets and pushing participants to withdraw rapidly. This liquidity shock spilled into the broader crypto market, weighing heavily on Bitcoin and other major assets.

Rate Cut Hopes Rise, but Macro Uncertainty Continues

The downturn comes shortly after Bitcoin wrapped up a steep monthly pullback, despite an improving outlook for U.S. monetary policy. Traders had been growing optimistic about cooling inflation and weaker economic data contributing to a Federal Reserve rate cut. Over the past week, expectations for a December cut have strengthened significantly, with markets assigning an 87% probability of a 25-basis-point reduction at the December 9–10 meeting, up from around 40% just one week prior.

While easier monetary conditions would normally support risk assets like cryptocurrencies, the panic surrounding the Yearn Finance exploit overshadowed any positive sentiment. Market uncertainty increased further after U.S. President Donald Trump commented over the weekend that he already knows who he will nominate as the next Federal Reserve Chair, though he did not disclose a name. His remarks intensified speculation, particularly around candidates such as former White House economic adviser Kevin Hassett, who is viewed as leaning dovishly on policy.

Altcoins Deep in Red as Panic Selling Hits the Market

The negative sentiment was not limited to Bitcoin. Ethereum slid 5.7% to $2,826, while XRP fell more than 7% to $2.03. Solana, Cardano, and Polygon also experienced steep declines, each registering losses between six and eight percent. Meme-inspired tokens followed the broader downtrend, with Dogecoin retreating sharply and the $TRUMP token also moving lower.

BTC, ETH, and XRP Face Potential for Deeper Losses

As December begins, major cryptocurrencies remain under pressure and face the possibility of further declines. Bitcoin continues to risk a move toward the $80,000 zone if bearish sentiment persists. Ethereum is vulnerable to a deeper pullback toward the $2,100 region, while XRP may extend its decline toward the $1.90 mark. The trio all posted losses exceeding four percent by Monday press time, signaling a fragile start to the month.

Zcash, Starknet, and Ethena Lead Market Declines

Beyond the top three cryptocurrencies, several mid-cap tokens are experiencing even heavier selling. Zcash, Starknet, and Ethena have emerged as some of the weakest performers, each extending their declines from last week and registering double-digit losses within a 24-hour window. The sharp downturn reflects growing risk aversion across the market following the DeFi-linked volatility shock.

UK Introduces New Crypto Tax Reporting Rules for 2026

In regulatory developments, the United Kingdom confirmed it will implement new crypto tax reporting obligations beginning January 1, 2026. Crypto exchanges operating in the country will be required to submit detailed transaction data from resident users directly to HM Revenue & Customs. The initiative aims to strengthen tax compliance and enhance oversight over cryptocurrency activity within the UK.