Using battle rage spends fury. The loss of damage comes from not being at max fury for a second or so. Switch out beserker rage to see for yourself.
To further elaborate, you're using Berserker rage. You need to be within 5-6 fury of your max for that to work. Using battle rage costs 20, and your BK weapons restore 10/sec. That's why it dips, goes back up after 1.5 seconds (15 fury regained), then dips a little again after 3 seconds (when taeguk falls off).