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Crypto research firm CryptoQuant has flagged a potentially troubling development for Bitcoin (BTC) and the wider digital asset market, pointing to an early warning signal that has historically appeared ahead of prolonged downturns.
In a report released Wednesday, the firm noted that Bitcoin’s supply in loss metric has begun to rise again, a shift that has often marked the early stages of past bear markets.
Possible Shift Toward Bear Market Structure
According to analysis by CryptoQuant contributor Woominkyu, increases in supply held at a loss tend to signal that market weakness is spreading beyond short‑term traders and gradually affecting longer‑term holders.
In previous market cycles, including 2014, 2018, and 2022, this indicator started trending upward well before prices reached their eventual lows.
During those periods, Bitcoin prices continued to decline even after the metric turned higher, with true market bottoms forming only once supply in loss expanded much further and broader capitulation set in.
At present, CryptoQuant notes that Bitcoin’s supply in loss remains well below levels typically associated with full market capitulation. However, the change in direction itself is significant.
The analysts say it suggests the market may be shifting into a bearish structural phase, rather than experiencing a brief correction within an ongoing bull market.
Bitcoin’s recent price action appears to reflect that uncertainty. The asset is currently trading around $89,700 and has struggled to reclaim the key $90,000 level as support.
This follows a steady decline from earlier yearly-highs near $98,000, where upward momentum faded as buying pressure weakened and gains recorded at the start of the year were fully erased.
US Dollar Tests Historic Zone For Bitcoin Rallies
Despite these cautionary signals, not all analysts believe the outlook is entirely negative. Analysts at Bull Theory have highlighted a potentially bullish catalyst that could emerge in the months ahead, centered on movements in the US dollar.
In a recent post on social media platform X (previously Twitter) the firm pointed out that the US Dollar Index is testing the same zone that preceded major Bitcoin bull runs in both 2017 and 2021.
According to their analysis, the Dollar Index has broken below a long‑term trendline that has held for roughly 16 years and is now hovering around the critical level of 96. Historically, periods when the DXY fell below 96 and remained there coincided with strong Bitcoin rallies.
As seen in the chart below, in mid‑2017, the index dropped under that level, after which Bitcoin surged nearly eightfold over the following five to six months. A similar pattern played out during the 2020 pandemic era.
When a wave of liquidity entered financial markets at the time, the DXY again slipped below 96, and Bitcoin went on to rise roughly seven times over the next seven to eight months. During that same period, Ethereum (ETH) and many altcoins posted gains of tenfold or more.
For now, the market sits at a crossroads. On‑chain data points to early bear‑market dynamics, while macro signals linked to the US dollar offer a counter‑narrative that could favor renewed strength.
Featured image from OpenArt, chart from TradingView.com
