Bitcoin Falls Below $87K as December Begins: Fed Ends QT, Yearn Exploit Adds Fresh Pressure

A Volatile Start to December for the Crypto Market

The crypto market kicked off 1 December 2025 with a sharp downturn as Bitcoin fell more than 5% intraday, slipping below $87,000 in early Asian trading. Ethereum followed with a drop of over 6%, falling under $2,900, while the overall market shed nearly $140 billion in capitalization.

This wasn’t a typical weekend dip — today’s decline lined up with two major catalysts affecting global sentiment:

1. The official end of the Federal Reserve’s Quantitative Tightening (QT) program.
2. Fresh concerns surrounding an alleged exploit targeting Yearn Finance’s yETH vault.

Combined, these events triggered a risk-off mood across both crypto and traditional markets, putting traders on edge as December opens with heightened uncertainty.

Bitcoin’s Drop: A Sudden Reaction to Macro + Protocol Headlines

Bitcoin’s descent below $87,000 surprised many traders, especially after several weeks of relatively stable price action. Analysts note that the drop wasn’t rooted in a single cause — rather, it was the result of macro turbulence, protocol-related fear, and position rebalancing.

1. Fed Ends QT Today — A Major Liquidity Shift

The U.S. Federal Reserve officially concluded its QT program on 1 December. QT refers to the shrinking of the Fed’s balance sheet, effectively removing liquidity from the financial system.

Its ending is widely considered a long-term bullish signal for risk assets like Bitcoin — but historically, the transition moment itself brings volatility.

Portfolio managers typically rebalance positions, reduce leverage, and hedge risk until a clear post-QT liquidity trend emerges. This repositioning contributed to today’s sell-off.

2. Yearn Finance’s yETH Vault Exploit Sparks Fear

Reports circulated early this morning that Yearn Finance’s yETH strategy may have been targeted by an exploit. Though on-chain investigators are still assessing the damage, the headline alone was enough to rattle DeFi participants.

Ethereum-related assets reacted sharply:

• DeFi tokens declined 4–10%

• DERIVATIVE pools saw increased outflows

• ETH itself dropped 6% in hours

Even without catastrophic losses, protocol fears amplify market fragility, especially when macro conditions are already shifting.

3. Bitcoin’s Market Structure Was Ripe for a Pullback

Technical analysts note that Bitcoin entered December in a highly sensitive range. Multiple factors made it vulnerable to sudden drops:

• Heavy leveraged long positions in the $89K–91K zone

• Low weekend liquidity

• A cluster of unfilled liquidity pockets below $88K

Whales often target such zones to trigger stop-loss runs and leveraged unwinds, which is exactly what the morning charts suggest.

Ethereum: Diverging Signals Despite Price Weakness

Ethereum’s fall under $2,900 may look bearish at first glance, but on-chain indicators show a mixed picture that traders should watch closely.

1. ETH Exchange Reserves Are Declining

More ETH continues flowing away from centralized exchanges into cold wallets.

 This typically signals long-term accumulation rather than capitulation.

2. Exchange Netflow Turned Negative

Outflows increased during the dip, indicating that some investors used the volatility as a buying opportunity.

3. Whales Accumulating During the Drop

Several whale wallets added to their ETH positions, seeking discounted entries ahead of the December liquidity shift.

These metrics suggest that despite negative price action, the underlying investor behavior remains constructive.

Overall Market Impact: $140B Wiped Out — But Panic Is Contained

Today’s correction erased roughly $140 billion from the global crypto market. However, unlike previous major crashes, sentiment suggests measured caution — not panic.

Here’s what makes this drop different:

• No systemic stablecoin depeg

• No exchange-wide outages

• Funding rates normalized rather than collapsed

• Long-term holders remained inactive (no panic selling)

This is more of a reset than a trend reversal.

Short-Term Market Forecast (Next 1–3 Weeks)

The crypto market faces a highly eventful December, with liquidity, macro signals, and on-chain flows all interacting. Based on current data, here are the plausible scenarios ahead.

1. Relief Bounce Toward $89K–$90K (Most Likely Scenario)

If liquidity stabilizes after QT and exploit fears fade, Bitcoin could reclaim higher levels quickly.

Negative funding rates indicate crowded shorts, which can trigger a sharp rebound.

Likely conditions:

• BTC reclaims the $89K–90K zone

• ETH retests $3,000–3,100

• Volatility decreases by mid-December

This scenario is supported by on-chain accumulation patterns.

2. Sideways-Choppy Movement (Medium Probability)

Should global markets remain cautious due to macro uncertainty, Bitcoin may stay range-bound.

Possible ranges:

• BTC: $84K–90K

• ETH: $2,800–3,050

Under this scenario, liquidity slowly improves but traders remain hesitant.

3. Another Downside Sweep (Low Probability)

A fresh protocol exploit or a major equity sell-off could create another leg down.

Key downside levels:

• BTC: $82K–84K

• ETH: $2,700–2,800

This is not the base case unless external shocks surface.

What Traders Should Watch After Today

To understand if today’s drop is temporary or the start of a broader trend, keep an eye on these indicators:

✔ 1. Fed Chair Comments This Week

Any signals about early-2026 rate plans could shift risk appetite dramatically.

✔ 2. Bitcoin Exchange Outflows

If BTC starts leaving exchanges again, it’s a strong sign of renewed accumulation.

✔ 3. DeFi Protocol Risks

After Yearn’s vulnerability reports, protocols may face increased scrutiny.

✔ 4. ETF Flows & Institutional Activity

This will determine whether large investors view the QT pivot as a buying opportunity.

✔ 5. Volatility Index (VIX) and Bond Yields

Macro fear indicators directly influence crypto’s short-term momentum.

Regional Perspective: What This Means for Retail Traders

India & Southeast Asia

Retail participation has remained stable despite volatility. INR-crypto on-ramps saw modest inflows today — an early sign of dip-buying interest.

US & Europe

ETF traders and institutions will likely wait for macro clarity before adding risk, especially after QT ending.

Africa & LATAM

Stablecoin use remains strong as volatility increases, with more users converting BTC/ETH profits into USDT/USDC temporarily.

Across regions, sentiment remains cautious but engaged — not fearful.

Conclusion — A Volatile Start, But Not a Structural Breakdown

The first day of December delivered a market surprise: Bitcoin’s fall below $87,000 matched with Ethereum’s slip under $2,900 set the tone for a turbulent week. But unlike past crashes, today’s decline stemmed from macro rebalancing, protocol headlines, and technical liquidity sweeps, not structural weakness.

With the Federal Reserve ending QT, liquidity conditions will shift over the coming weeks — a powerful fundamental driver for markets. On-chain accumulation, whale behavior, and stable exchange activity all suggest that this correction may evolve into a healthy reset rather than a long-term downturn.

Volatility is likely to remain elevated, but the foundation for a December recovery is still intact.

Crypto didn’t start the month bullish — but it started honest. And the market often prefers honesty before momentum.

See all our insights: Bitcoin World News