Loss-making UTXOs (unspent transaction outputs) rose above 165 million as of June 2, a record high, as bitcoin prices fell.

According to blockchain outlet Cryptopolitan, bitcoin has dropped more than 16 percent over the past week, sliding from around $76,000 to about $64,000. That is about 50 percent below the all-time high recorded in October last year.

The decline reflected a combination of large outflows from spot exchange-traded funds (ETFs), negative developments linked to Mt. Gox, and reports that Strategy made its first bitcoin sale since 2022. The move has sharply increased holdings in the market that have fallen below their purchase price.

A UTXO refers to bitcoin received once and not yet moved. Each UTXO is tagged with the price at which it last moved, and it is classified as loss-making if the current market price falls below that level. This does not mean an actual sale has occurred or that losses have been realised.

A record high in loss-making UTXOs does not necessarily mean a more severe bear market than in the past. The total number of UTXOs on the network has risen sharply in recent years. Loss-making UTXOs were around 40 million at the bottom of the 2022 bear market, but the number of individual outputs accumulated on-chain rose significantly as exchange activity increased and ordinals spread. That means the rise in loss-making UTXOs also reflects structural factors.

That is why some point to "loss supply" rather than the raw count as more important for reading market sentiment. The measure is less affected by the rise in total outputs and shows how much of the circulating bitcoin supply sits in loss territory. Loss supply currently exceeds 9.5 million BTC, but it was presented as lower than the extreme phases of the 2022 and 2019 bear markets.

The key level to watch next is the realised price of $53,500. It represents the overall average cost basis, reflecting the price of every coin on the network when it last moved. In past bear markets, the level acted as a floor. There is room between the current $62,000 area and the realised price, but if bitcoin falls about 15 percent further to $53,500, the market will face a bigger test.

The record is a warning that coins in loss territory have increased sharply on the bitcoin network, while also indicating where the market's final test may lie. The 165 million loss-making UTXOs show that substantial holdings are stuck at higher price levels, and the market has entered a phase of checking whether selling pressure will intensify near the realised price.

With loss-making UTXOs hitting a record, the near-term burden on the bitcoin market has increased. Still, with loss supply not yet reaching an extreme zone compared with past bear markets, whether prices can hold the $53,500 realised price level is expected to be a turning point for market sentiment.