The ‘Bear Market Signal’: This Bitcoin indicator flashed red after 3 years

The structural growth of the Bitcoin network has entered a contraction phase.

When this signal turned negative in previous cycles, crypto assets entered a prolonged downturn as long-term capital inflows weakened.

Bitcoin’s capital structure

Bitcoin’s Long-Term Realized Cap Impulse tracks changes in realized capitalization over longer periods of time and is used to assess whether new capital is entering the network or whether inflows are slowing or reversing.

A negative reading indicates that new capital inflows have weakened or come to a standstill, that demand is no longer absorbing supply at the same pace and that the structural growth of the network has entered a contraction phase. Alphractal explained that in previous market cycles, any instance where the Realized Cap Impulse (Long-Term) turned negative was followed by significant price corrections or prolonged bear markets.

The firm linked this pattern to Bitcoin’s supply-demand dynamics, saying that when supply remains available while new capital inflows decline, there is typically downward pressure on the price. Unlike traditional market cap, realized cap values ​​BTC at the price it last moved up the chain, making the metric reflect the actual capital allocated to the network rather than price-driven fluctuations.

By filtering out short-term market noise, the indicator focuses on long-term capital behavior over months and years. With the signal back negative after three years, Alphractal says the current cycle may be entering a phase of structural weakening of capital inflows.

Meanwhile, Alphractal founder Joao Wedson too said that “even as ETFs pile up and big institutions like Strategy increase their positions, it is still not enough to offset the period where supply exceeds demand.”

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Global uncertainty

The latest on-chain capital trends appear to be unfolding against a macro backdrop of unusually high uncertainty. According to CryptoQuant, the Global Uncertainty Index does reaches an all-time high, after exceeding levels set by the September 11 attacks, the Iraq War, the 2008 financial crisis, the Eurozone debt crisis and the Covid-19 pandemic.

CryptoQuant stated that the current reading shows an environment where markets struggle to find direction, capital moves with greater caution and risk is priced more aggressively. The data also indicates that geopolitical, economic and political pressures are all operating at the same time. This environment has created conditions where high volatility can become a feature rather than a temporary disruption.

Periods of extreme uncertainty have coincided with significant changes in market positioning as participants reassess their exposure in volatile conditions. While uncertainty often leads to defensive behavior, the company added that such phases have also included periods of large-scale repositioning.