Bitcoin Bear Market Alert: Supply in Loss Surpasses 40%

Bitcoin has dropped below the $80,000 mark over the weekend as selling pressure increased in global markets, creating an atmosphere of uncertainty that has affected risk assets in recent weeks. This downturn coincides with a general decline in equities, heightened volatility, and reduced liquidity, which has led many investors to adopt a more cautious approach.

Key Takeaways:

Bitcoin has fallen below $80,000 amidst increasing global selling pressure.
On-chain data shows that the Supply in Loss metric has risen sharply to 44%, indicating more BTC is held at an unrealized loss.
Current market conditions resemble those seen at the beginning of previous bear markets.
The market has not yet reached full capitulation, but risks of transitioning into a prolonged bear phase are increasing.
Higher timeframe analysis shows a weakening price structure, with significant downside risks remaining until the market stabilizes.

While this price movement might resemble previous corrections, blockchain data indicates that the market's underlying structure is beginning to change.

A recent analysis from CryptoQuant reveals that Bitcoin is starting to show signs that historically link to the early stages of bear markets. A significant indicator is the Supply in Loss (%) metric, which has increased sharply to around 44% and continues to trend upward. This suggests that a growing portion of circulating Bitcoin is currently held at a loss, indicating rising pressure among market participants.

Bitcoin Supply in Loss | Source: CryptoQuant

Notably, Bitcoin is still trading above its Realized Price, suggesting that the market hasn't fully capitulated yet. However, the rise in losses combined with a weakening price structure raises concerns that this phase could signal a move into a more extensive bear market rather than just a temporary pullback within a continuing uptrend.

Signs of a Shift Towards a Bear Market

The report explains that Bitcoin’s current on-chain structure resembles conditions seen at the beginning of prior bear markets. Historically, several signals have emerged together at the start of prolonged bearish phases rather than at the conclusion of routine corrections.

Indicators such as Supply in Loss exceeding approximately 40%, a concurrent decrease in Supply in Profit, and prices remaining high relative to their realized value often accompany each other at these pivotal moments. When these conditions align, they have typically indicated a beginning of structural weakening rather than a mere reset before another upward trend.

Currently, the alignment of these signals paints a concerning picture. The Supply in Loss has decisively moved above the 40% threshold, while the profitable supply is gradually decreasing. This shift is occurring without widespread panic, indicating that losses are spreading among supply in a controlled but persistent manner. This trend suggests a gradual decline in market health, with more participants holding Bitcoin at a loss while prices struggle to make a notable recovery.

In previous cycles, sustainable market bottoms usually formed only after a further expansion of Supply in Loss, typically alongside more significant price compression and a clearer capitulation phase. As of now, these conditions have not been fully realized, implying that the market is still transitioning and has not reached a mid-cycle dip. On-chain signals suggest that Bitcoin is moving into a bear market structure, with lingering downside risks until clearer signs of capitulation or market stabilization are evident.

Deteriorating Market Structure on Higher Timeframes

The price structure of Bitcoin has significantly deteriorated on higher timeframes, as indicated by the 3-day chart. After months of consolidation below previous all-time highs, Bitcoin has decisively broken below the $80,000 psychological level, closing around $77,500. This decline confirms a loss of medium-term support and marks a distinct shift from distribution to continued downside.

BTC testing critical demand | Source: BTCUSDT chart on TradingView

From a trend analysis perspective, the price has dipped below the 50-period and 100-period moving averages, both of which are now beginning to decline. The 200-period moving average, though still rising, is flattening out near the mid-$80,000 range. This average has failed to serve as reliable support and now represents a significant resistance zone. Historically, trading below these averages signals weak trend strength and a reduced likelihood of immediate trend recovery.

The recent sell-off distinctly shows a sharp, impulsive character, characterized by large bearish candles with minimal lower wicks. This indicates aggressive selling pressure rather than a measured consolidation. Volume increased during this breakdown, reinforcing the validity of the movement and suggesting forced exits rather than passive reallocations.

Currently, the market is exhibiting lower highs and lower lows on this timeframe. Unless Bitcoin can quickly reclaim the $80,000 to $85,000 range, the downside risk remains significant. In this context, the absence of recovery signs suggests continued bearish momentum, with a prolonged basing period possibly preceding any substantial recovery efforts.