Crypto research firm CryptoQuant has identified a potential warning sign for Bitcoin and the broader cryptocurrency market, pointing to an indicator that has historically preceded extended downturns.
In a report released Wednesday, the firm noted that Bitcoin’s “supply in loss” metric has started to rise again. This shift has often marked the beginning of past bear markets.
Potential Shift to Bearish Structure
According to analysis by CryptoQuant contributor Woominkyu, an increase in supply held at a loss typically signals that market weakness is spreading from short-term traders to longer-term holders. In previous cycles, such as those in 2014, 2018, and 2022, this indicator began rising well before prices hit their ultimate lows.
During those periods, Bitcoin’s price continued to fall even after the metric turned upward, with true market bottoms forming only after losses spread more widely and broader capitulation occurred. Currently, CryptoQuant notes that Bitcoin’s supply in loss is still far below levels seen during full market capitulation. However, the change in direction is significant.
Analysts suggest this indicates the market may be entering a bearish structural phase, rather than just a temporary correction within a bull market. Bitcoin’s recent price action reflects this uncertainty, with the asset struggling to reclaim the $90,000 support level and currently trading around $89,700. This follows a steady decline from yearly highs near $98,000, erasing gains made earlier in the year.
US Dollar Presents a Potential Bullish Catalyst
Despite these cautionary signals, some analysts see a potential positive catalyst on the horizon, tied to movements in the US dollar.
Analysts at Bull Theory noted on social media platform X that the US Dollar Index (DXY) is testing the same zone that preceded major Bitcoin bull runs in 2017 and 2021. Their analysis shows the DXY has broken below a long-term trendline that held for roughly 16 years and is now hovering around the critical level of 96.
Historically, periods when the DXY fell below 96 and stayed there coincided with strong Bitcoin rallies. For instance, in mid-2017, the index dropped below that level, after which Bitcoin surged nearly eightfold over the next five to six months. A similar pattern occurred during the 2020 pandemic; as liquidity flooded financial markets, the DXY slipped below 96, and Bitcoin rose roughly sevenfold over the following seven to eight months. During that same period, Ethereum and many altcoins saw gains of tenfold or more.
For now, the market stands at a crossroads. On-chain data points to early bear-market dynamics, while macroeconomic signals linked to the US dollar offer a counter-narrative that could support renewed strength.
Frequently Asked Questions
FAQs Bitcoin Supply in Loss Bear Market Concerns
Beginner Questions
What does Bitcoin supply in loss mean
It refers to the total amount of Bitcoin currently held in wallets where the purchase price is higher than Bitcoins current market price In simple terms its coins being held at a loss
Why is this metric important
It helps gauge market sentiment and potential selling pressure When a large portion of the supply is in loss it can indicate widespread investor stress and may signal a market bottom or increased volatility
What is a bear market for Bitcoin
A bear market is a prolonged period where prices are falling or stagnant typically characterized by a decline of 20 or more from recent highs accompanied by widespread pessimism
How does rising supply in loss relate to a bear market
A sharp rise in supply in loss often occurs during price downturns If this metric climbs significantly it suggests many holders are underwater which can fuel fear lead to panic selling and deepen or confirm a bearish trend
Is this a guaranteed sign of a coming price drop
Not always While it indicates stress a high supply in loss has also historically coincided with major market bottoms as selling by discouraged investors can exhaust downward pressure
Intermediate Advanced Questions
How is supply in loss calculated
Its typically calculated by onchain analysis firms They track the movement of coins and estimate their acquisition price If that price is above the current spot price those coins are counted in the in loss supply
Whats the difference between Supply in Loss and Realized Loss
Supply in Loss A snapshot of coins currently held at a loss
Realized Loss The actual value of losses locked in when those coins are sold onchain Rising supply in loss shows potential spiking realized loss shows active selling
Can this metric predict a market bottom
Its a strong contrarian indicator Extremely high levels of supply in loss have often marked peak fear and preceded significant price recoveries as weak hands sell to stronger hands
What other onchain metrics should I watch with this