By looking at the delta between the price when a UTXO was created vs. the current price of an asset, we can determine whether the specific coins in that UTXO are in a state of unrealized profit (price has increased) or loss (price has decreased), and to what extent.
Unrealized Loss represents the total loss accrued by UTXOs which were created (i.e. realized) when the price of the asset was higher than the current price.
Unrealized Loss is defined as the total loss (in USD) of all coins in existence whose price at realization time was higher than the current price, normalized by the market cap.
Rafael Schultze-Kraft - Dissecting Bitcoin's Unrealised On-Chain Profit/Loss