This Bitcoin Indicator Just Flashed Red After 3 Years

The Bitcoin network’s structural growth has entered a contraction phase.

Bitcoin stabilized above $66,000 on Friday, though the asset has fallen about 30% over the past month. According to analysis by Alphractal, Bitcoin’s Realized Cap Impulse (Long-Term) has turned negative for the first time in three years.

When this signal turned negative in past cycles, the crypto asset entered extended downturns as long-term capital inflows weakened.

Bitcoin’s Capital Structure

Bitcoin’s long-term Realized Cap Impulse tracks changes in realized capitalization over extended periods 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 stalled, demand is no longer absorbing supply at the same pace, and the network’s structural growth has moved into a contraction phase. Alphractal explained that in previous market cycles, every instance in which 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 and said that when supply remains available while new capital inflows decline, downward pressure on price typically emerges. Unlike traditional market capitalization, realized capitalization values BTC at the price it last moved on-chain, which allows the metric to reflect actual capital committed 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 now negative again after three years, Alphractal said the current cycle is potentially entering a phase of structural weakening in capital inflows.

Meanwhile, Alphractal founder Joao Wedson also said that “even with ETFs accumulating and large institutions like Strategy increasing their positions, it is still not enough to offset the period when 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. As per CryptoQuant, the Global Uncertainty Index has reached an all-time high, after exceeding levels seen during the 9/11 attacks, the Iraq War, the 2008 financial crisis, the Eurozone debt crisis, as well as the Covid-19 pandemic.

CryptoQuant stated that the current reading demonstrates an environment where markets are struggling to find direction, capital is moving with greater caution, and risk is being priced more aggressively. The data also indicates that geopolitical, economic, and political pressures are all active at the same time. This environment has created conditions in which high volatility may become a feature rather than a temporary disruption.

Periods of extreme uncertainty have coincided with significant changes in market positioning, as participants reassess exposure amid unstable conditions. While uncertainty often triggers defensive behavior, the firm added that such phases have also seen periods of large-scale repositioning.