Bitcoin Crashes Below $88,000: ETF Outflows, Liquidity Squeeze and DeFi Hack Darken December Outlook

Bitcoin is starting December on the back foot, extending a brutal November slide that has wiped out all of its 2025 gains and knocked the world’s largest cryptocurrency roughly 30% below its October record. ^[1]

In early Asian trading on December 1, bitcoin fell as much as 4.3% to below $88,000, while ether dropped about 6% under $2,900, in a broad crypto selloff. ^[2] Spot prices have since hovered near $87,000, with intraday ranges between about $87,000 and $90,000 according to major exchanges and data providers. ^[3]

At the same time, a fresh exploit of Yearn Finance’s yETH product, heavy outflows from bitcoin exchange‑traded funds (ETFs), and signs of waning retail enthusiasm are combining into a potent mix of headwinds not seen in earlier crypto crashes. ^[4]

Bitcoin Price Today: From Record Highs to December Slump

Bitcoin’s rough start to December caps a dramatic reversal from just two months ago:

In early October, BTC hit a new all‑time high above $125,000, driven by strong ETF inflows and enthusiasm around looser monetary policy. ^[5]
Since then, bitcoin has shed around one‑third of its value, erasing nearly $800 billion in market capitalization. ^[6]
November is on track to be bitcoin’s worst month since mid‑2022, when major crypto firms collapsed and triggered a deep bear market. ^[7]

As of December 1, bitcoin is trading roughly 28–30% below its October peak around $126,000, matching analysis from Yahoo Finance and Deutsche Bank that frame this downturn as a full‑fledged bear phase, not a brief correction. ^[8]

Headwind #1 – ETF Outflows Flip Bitcoin’s Biggest Bull Story

Spot bitcoin ETFs were the hero of the 2024–2025 bull market. Their approval in early 2024 helped spark a more than 600% rally in BTC as institutions piled in via regulated vehicles. ^[9]

Now, those same ETFs are acting as a drag:

ETF outflows hit about $3.5 billion in November, the largest monthly outflow since February, according to research cited by Reuters and 10x Research. ^[10]
Analysts say this flip from steady inflows to sustained outflows suggests many institutional allocators have paused or reversed their bitcoin exposure.
When ETFs are net sellers, they create a steady stream of supply into a market where fresh demand is already thinning, making sustained rebounds harder. ^[11]

Deutsche Bank analysts argue this is one reason the current 30% drawdown could prove harder to recover from than prior crashes, since institutional products now act as a powerful transmission channel for selling pressure. ^[12]

Headwind #2 – Liquidity Leak: Stablecoins and On‑Chain Activity Are Fading

The second major headwind is weakening liquidity across the crypto ecosystem:

10x Research points to a slowdown in stablecoin issuance and usage. Their data suggest roughly $800 million flowed out of crypto and back into fiat currencies in a recent week. ^[13]
Since November 1, the total market capitalization of stablecoins has fallen by about $4.6 billion, reversing gains seen during October’s volatility. ^[14]

Because stablecoins are the grease of crypto trading—used as base pairs, collateral, and dry powder—a drop in their supply indicates less capital ready to buy dips or provide liquidity.

Separately, analysts at The Motley Fool highlight that bitcoin’s mempool (the queue of unconfirmed transactions) has spent much of 2025 near levels usually seen in bear markets, signalling subdued transactional demand and lower willingness to pay for block space. ^[15]

Put simply: money isn’t just failing to come in; it’s leaving, and the on‑chain activity that often accompanies vibrant bull markets is conspicuously absent. ^[16]

Headwind #3 – Long‑Term Holders and Miners Are Taking Chips Off the Table

The third headwind is selling from long‑term holders and miners, the same cohort that historically absorbs shocks and sets long‑term floors.

According to on‑chain data cited by Nansen and 10x Research: ^[17]

Veteran “OG” holders have been distributing coins into the downturn, consistent with a long‑observed pattern around bitcoin’s four‑year halving cycle.
Some early adopters appear to be using this cycle’s new highs to de‑risk and realize profits, rather than add to positions.
Publicly listed miners such as IREN, Riot and MARA have seen their shares drop more than 30% during the recent slide, reflecting both lower margins and reduced investor appetite for high‑beta crypto plays. ^[18]

Together, these trends mean there’s less patient capital stepping in to buy aggressive dips, which historically helped bitcoin snap back from deep corrections.

Why This Bitcoin Crash Looks Different From 2018 and 2022

Deutsche Bank’s research, highlighted by Business Insider, makes the case that this downturn is structurally different from prior crashes in two key ways: ^[19]

Stalling Adoption
- The share of retail investors actively using crypto has slipped from about 17% in the summer to 15% now, according to the bank.
- That challenges one of bitcoin’s core bullish narratives: ever‑widening adoption.
- Analysts revive their so‑called “Tinkerbell effect” thesis—the idea that bitcoin’s value is partly sustained by collective belief. As sentiment sours, that belief weakens, reinforcing selling.
Institutionalization via ETFs and Treasuries
- This is the first 30%+ drawdown since spot ETFs launched in 2024. Those vehicles sped bitcoin’s rise but now amplify selling, as redemptions translate directly into market supply. ^[20]
- Large pools of capital—ETFs, corporate treasuries, and professional traders—are now integral to market structure. When they de‑risk, they do so in size, thin order books and dampen the explosive short‑covering rebounds seen in earlier retail‑led crashes. ^[21]

Bloomberg also notes a striking twist: even with a drawdown of up to 36% from October’s peak, implied volatility has remained relatively contained, suggesting that Wall Street’s growing role is muting the wild price swings that once defined bitcoin’s cycles. ^[22]

The result is a market that feels more “institutional” but less forgiving—prone to grinding drawdowns rather than euphoric V‑shaped recoveries.

December 1: Yearn Finance Hack Adds Fresh Fuel to the Selloff

Today’s leg lower isn’t just about macro and flows. It also coincides with another blow to confidence in decentralized finance (DeFi).

Security researchers and blockchain data show that: ^[23]

Yearn Finance’s yETH index token was hit by an exploit that allowed an attacker to mint effectively unlimited yETH, then dump those tokens into liquidity pools.
The attacker siphoned roughly 1,000 ETH (about $3 million) from associated pools, routing much of it through privacy protocol Tornado Cash.
Yearn and partner protocols moved to pause contracts and investigate, but the incident triggered sharp on‑chain flows and renewed questions about DeFi security.

Coindesk reports that as news of the “Yearn incident” spread, bitcoin slid over 3% to near $87,000, with ether and other major tokens falling in tandem at the start of Asian trading. ^[24]

While the dollar amount is small relative to bitcoin’s trillion‑dollar market, psychology matters. After a year of exploits, downgrades of key stablecoins, and regulatory probes into major exchanges, each new security failure feeds into a broader risk‑off narrative around digital assets. ^[25]

Macro Cross‑Currents: Fed Policy, AI Jitters and Risk Sentiment

Bitcoin’s slump is unfolding against a complicated macro backdrop:

In September, the Federal Reserve delivered its first rate cut since 2023, trimming the policy rate by 25 basis points to a 4–4.25% range. Markets interpreted the accompanying projections as opening the door to further easing. ^[26]
Some of the most bullish bitcoin commentators believe a “Fed flip” in December—a shift toward more aggressive cuts and liquidity injections—could unleash another powerful rally in risk assets, including crypto. ^[27]
Yet broader markets are wrestling with concerns about an AI‑driven bubble in tech stocks, softer labor data, and uncertainty over whether the Fed will actually follow through on multiple rate cuts. ^[28]

This tug‑of‑war leaves bitcoin in an awkward spot: still treated as a high‑beta macro asset that benefits from looser financial conditions, but increasingly tied into the same institutional plumbing that can transmit stress into crypto instead of from it.

Crypto Market Contagion: Beyond Bitcoin

Bitcoin’s weakness is mirrored across the broader digital asset market:

Total crypto market capitalization has dropped over 30%, from about $4.28 trillion to $2.99 trillion since early October. ^[29]
Ether is down roughly 38% over the same period, while Solana has fallen more than 40%. ^[30]
Many “digital asset treasuries” (public companies that loaded their balance sheets with crypto following MicroStrategy’s playbook) are now underwater on those holdings, according to recent market analyses. ^[31]

Alongside ETF outflows and DeFi shocks, this broad‑based selloff reinforces the sense that crypto is in a genuine bear phase, not merely a sharp but brief correction.

What Could Turn the Trend?

No one can say with certainty where bitcoin’s price will go next, but analysts are watching several key signposts:

ETF Flow Reversal
- A sustained return to net inflows in major spot ETFs would signal renewed institutional confidence and help absorb selling from traders and long‑term holders. ^[32]
Stabilizing Stablecoins and On‑Chain Demand
- Rising stablecoin market caps, a busier mempool, and higher on‑chain transaction fees would hint that capital is again entering the ecosystem rather than quietly leaving it. ^[33]
Federal Reserve Signals
- A clearer path toward multiple rate cuts in 2026 could restore risk appetite—though there’s no guarantee bitcoin will respond as explosively as in earlier cycles, given its growing institutionalization. ^[34]
Security and Regulatory Progress
- Fewer high‑profile hacks and more consistent regulatory frameworks, particularly around market structure and stablecoins, could gradually rebuild trust among cautious investors. ^[35]

For now, the weight of ETF outflows, thinning liquidity and long‑term holder selling means bitcoin enters December firmly on the defensive, even as some optimists still see the ingredients for a late‑year rebound.