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Bitcoin Plunges 5% as Yearn Finance Exploit Sparks Market Panic
Bitcoin (BTC) experienced a sharp decline in Asian trading on Monday, dropping 5.3% to $86,075.6 by 01:07 ET (06:07 GMT) after opening the new month amid renewed market turbulence. Over the past 24 hours, BTC fell as low as $85,638.3, continuing the bearish trend following a 16% decline in November.
The sell-off was triggered by an incident at decentralized finance (DeFi) platform Yearn Finance, which has reignited concerns over liquidity in crypto markets.
Yearn Finance Exploit Sparks Panic
The turmoil began when Yearn Finance announced it was investigating an “incident” in its yETH liquidity pool. Reports suggested a vulnerability had allowed an attacker to mint an excessive number of yETH tokens, flooding the pool with invalid supply.
In simpler terms, the exploit enabled someone to create tokens out of thin air, undermining confidence in the pool’s backing assets. This immediately prompted traders to exit positions, sending shockwaves through the broader crypto market.
As a result, Bitcoin and correlated cryptocurrencies fell sharply, reflecting the market’s sensitivity to DeFi-related risks and liquidity concerns.
Fed Rate Cut Bets in Focus
Despite improving sentiment around U.S. monetary policy at the end of November, Bitcoin’s decline persisted. Investors had initially found support from expectations of a Federal Reserve rate cut in December, which strengthened over the past week.
Traders now assign an 87% probability to a 25-basis-point cut at the December 9–10 Fed policy meeting, up from near 40% only a week ago. Weaker U.S. growth indicators and moderating inflation pressures contributed to this shift.
However, the Yearn Finance incident overshadowed optimism surrounding easier monetary conditions. Adding to macro uncertainty, U.S. President Donald Trump stated over the weekend that he has already selected a nominee for the next Fed Chair, although the name has not been publicly disclosed. The remarks intensified speculation around potential candidates, including former White House economic adviser Kevin Hassett, who is seen as favoring dovish monetary policies.
Altcoins Suffer Heavy Losses
The ripple effect of the Yearn Finance disruption was felt across major altcoins. Ethereum (ETH), the world’s second-largest cryptocurrency, dropped 5.7% to $2,826.92, while XRP slid 7.3% to $2.03.
Other notable declines included:
- Solana (SOL): -7.5%
- Cardano (ADA): -8%
- Polygon (MATIC): -6.5%
Even meme tokens were not spared. Dogecoin (DOGE) fell 8%, and $TRUMP dropped 5%, highlighting the market-wide impact of the Yearn Finance incident.
Market Implications and Outlook
The start of December has underscored the fragility of crypto markets in the face of DeFi vulnerabilities and ongoing macroeconomic uncertainty. The Yearn Finance exploit has shaken investor confidence, while Fed rate cut expectations provide a counterbalance that may temper further losses.
Analysts note that while BTC and major altcoins are experiencing sharp corrections, macro developments in U.S. monetary policy could influence market stabilization. However, the current sentiment is dominated by risk aversion, with traders closely monitoring both DeFi platforms and regulatory signals in the coming weeks.
On Monday, Bitcoin fell 5.3%, extending its November losses to roughly 16%, as the market reacted to a Yearn Finance yETH pool exploit that triggered widespread panic. Major cryptocurrencies including Ethereum, XRP, Solana, Cardano, Polygon, Dogecoin, and $TRUMP all experienced significant declines. While expectations for a Federal Reserve rate cut remain high, broader optimism has been overshadowed by DeFi liquidity risks and geopolitical uncertainty. Moving forward, investor attention is expected to stay focused on ongoing liquidity issues in DeFi and the potential nomination for the next Fed Chair.
As the crypto market navigates the start of December, volatility is likely to persist, driven by DeFi incidents, Fed policy speculation, and ongoing macroeconomic uncertainty.
