Bitcoin fell sharply in Asian trading on Monday at the start of the new month amid renewed turmoil in the cryptocurrency market, following an incident at decentralized finance platform Yearn Finance that raised fresh concerns about liquidity.
The world's largest cryptocurrency was trading down 5.3% at $86,075.6000 by 09:07 Saudi time.
Bitcoin fell to a low of $85,638.30 in the past 24 hours. It has declined by more than 16% in November.
The sell-off began after Yearn Finance announced it was investigating an incident at its yETH liquidity pool. Reports indicated a bug allowed an attacker to create an excessively large amount of yETH tokens, effectively flooding the pool with invalid supply.
Simply put, this loophole enabled someone to create tokens out of thin air, undermining confidence in the underlying assets of the pool and prompting traders to exit quickly.
This disruption triggered immediate fluctuations in related assets, with a sharp decline in Bitcoin and other cryptocurrencies.
Focus on expectations of Federal Reserve interest rate cuts
The decline came after Bitcoin ended November with a sharp monthly drop. The pressure persisted despite improved sentiment surrounding US monetary policy, which had supported risk assets toward the end of last month.
Expectations of an interest rate cut by the Federal Reserve in December were significantly strengthened last week, driven by signs of weak US growth and easing inflationary pressures.
Traders now give an 87% probability of a 25-basis-point rate cut at the policy meeting scheduled for December 9-10, compared to near 40% just a week ago. The prospect of easing monetary conditions initially helped stabilize cryptocurrency markets, but the Yearn Finance incident has dampened this optimism.
Adding to the economic uncertainty was US President Donald Trump's statement over the weekend that he already knows who he will nominate to be the next Federal Reserve chair, although he did not publicly reveal a name. These comments intensified speculation about potential candidates, including former White House economic adviser Kevin Hassett, who is seen as favoring an accommodative monetary policy.
Cryptocurrency prices today: Ethereum falls 6%, XRP drops by more than 7%
Most alternative currencies also saw sharp declines on Monday amid renewed panic.
Ethereum, the world's second-largest cryptocurrency, fell 5.7% to $2,826.9200.
XRP, the world's third-largest cryptocurrency, fell 7.3% to $2.0300.
Solana fell by 7.5%, while Cardano dropped by 8% and Polygon lost 6.5%.
Among the meme currencies, Dogecoin fell by 8% and $TRUMP declined by 5%.
