Bitcoin slides below $86,500, wiping out $144 billion in crypto market cap

Bitcoin dropped below $86,500 on Sunday night, as macroeconomic pressure and Yearn Finance's hacking incident drove investors toward risk-off positions. 

According to The Block's bitcoin price page, the cryptocurrency fell 4.8% in the past 24 hours leading up to 11:40 p.m. to trade at $86,310. Other major cryptocurrencies also declined notably — ether dropped 5.36% to $2,827, XRP fell 6.39% to $2.05 while Solana dipped 6.41% to $126.

The mass sell-off occurred during Sunday evening, where bitcoin plunged from roughly $91,300 at 7 p.m. to near $87,000 in just three hours. The move pulls BTC back to levels last seen during November's mid-to-late downturn, erasing its five-day recovery above $90,000. In the past four hours, the entire crypto market capitalization fell by 4.5%, wiping out more than $144 billion.

Bitcoin's brief bitcoin earlier this month had been fueled by rising expectations for an interest rate cut by the U.S. Federal Reserve in December, with the CME Group's FedWatch Tool currently indicating an 87.4% chance of a 25 basis point reduction. However, analysts say rate cut hope alone isn't enough to rejuvenate upward momentum in the market.

"It's more about positioning than fundamentals," BTC Markets Crypto Analyst Rachael Lucas told The Block. "December cut odds have climbed to around 85%, but the market priced that in months ago during the September-October rally."

According to the analyst, risk appetite remains capped by "sticky inflation and tariff chatter." That macro pressure — combined with $3.5 billion in monthly outflows from bitcoin ETFs in November and billions of dollars in leveraged long positions liquidated since mid-November — has fueled what Lucas described as a "classic deleveraging spiral."

"BTC is behaving like a high-beta risk asset, it needs a real liquidity flood, not just a dovish whisper," Lucas added.

The concentration of bitcoin selling was worsened on Sunday as DeFi protocol Yearn Finance was hacked, where attackers drained its yETH token pool and sent 1,000 ETH to Tornado Cash. This follows another hacking incident from major South Korean crypto exchange Upbit last week.

"Given that Yearn is a relatively large DeFi aggregator that moves funds amongst Aave, Compound, and Curve, it's likely that traders are afraid that panic could cause more unstaking and withdrawals, exacerbating a sell-off," BTSE COO Jeff Mei said.

"$87,000 is the line in the sand, held overnight and we could see further upside," Lucas said. "Lose that and $80,400 becomes the next magnet, with a liquidity sweep toward US$75K if it breaks."

Bull & bear

Still, the BTC Markets analyst said the Fed's rate cut, if it happens, could help bitcoin rally 10% to 15% in the following week toward $95,000 to $100,000 as it did historically with prior cuts. Lucas said if Fed Chair Jerome Powell gives a further dovish comment on top of the cut, bitcoin could surge toward $110,000 to $120,000.

"The bear case? 'Sell the news' if Powell signals pauses, then we're back testing $80,000," Lucas added. "Cuts alone won’t erase tariff and geopolitical fog, so watch ETF flows for confirmation."

Crypto venture capital firms share the view that macro clarity is the most important catalyst over the next few months.

Boris Revsin, general partner and managing director at Tribe Capital, told The Block that while the market has already priced in the potential interest rate cut, it is underestimating how dovish policy could become if a new Fed chair leans toward keeping liquidity flowing.

On Sunday, President Donald Trump announced that he has chosen his pick for the next Fed Chair, while not disclosing the name. Bloomberg previously reported that current White House National Economic Council Director Kevin Hassett is the leading contender.

"Given Trump's revelation over the weekend that he has already decided on a new Fed chairman, we expect markets to bounce back on renewed rate cut optimism over the next few weeks," Mei said.