Bitcoin Supply in Loss Expansion Signals Structural Market Weakness

Bitcoin is currently trading above its Realized Price, but on-chain conditions are beginning to show a notable deterioration beneath the surface.

While price remains elevated relative to realized value, the distribution of profit and loss across the supply is shifting in a way that historically has not aligned with healthy corrections.

The current structure shows losses spreading through the supply without visible capitulation, suggesting that pressure is building structurally rather than being released through a sharp panic-driven reset.

Short-Term On-Chain Behavior

According to the CryptoQuant chart, Supply in Loss (%) has risen sharply to approximately 44% and continues trending higher, even as price remains above the Realized Price. At the same time, Supply in Profit (%) is declining, indicating that a growing portion of holders are moving into unrealized loss.

In prior market behavior shown on the chart, this combination did not appear during routine pullbacks or mid-cycle consolidations. Instead, it emerged during the early stages of broader bearish transitions, where losses began spreading gradually rather than explosively.

This pattern suggests that downside pressure is increasing despite the absence of clear panic conditions.

Structural Comparison With Previous Cycles

Historically, the chart shows that when:

• Supply in Loss expands above roughly 40%
• Supply in Profit declines simultaneously
• Price remains elevated relative to realized value

the market has tended to enter prolonged downside phases, rather than forming durable local bottoms.

In those prior cycles, true market bottoms only developed after Supply in Loss expanded further, following deeper and more sustained price compression. The current configuration closely resembles those early-stage transitions rather than late-cycle exhaustion.

Scenarios and Risk Assessment

• Bearish Continuation Scenario:
  If Supply in Loss continues to expand while Supply in Profit contracts further, it would indicate that losses are still spreading across the holder base. This would reinforce the view that the market is weakening structurally, rather than resetting for another expansion phase.
• Invalidation / Stabilization Scenario:
  For this structure to stabilize, Supply in Loss would need to stop expanding, with Supply in Profit flattening or recovering. Without that shift, downside risk remains unresolved based on the current on-chain configuration.

Takeaway

This structure no longer resembles a standard mid-cycle dip. The on-chain data presented in the chart suggests Bitcoin is transitioning into a bear market phase, with losses spreading gradually through the supply while price remains elevated relative to realized value.

For now, the market appears to be weakening structurally rather than completing a corrective reset, and confirmation will depend on whether Supply in Loss continues to expand or begins to stabilize.

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