Currently, many developers, myself included have created typing indicators above the player to let other players know that they’re being replied/spoken to.
In my case, the legacy chat allowed me to fire an event when the textbox was focused. The event was used to perform a “thinking animation” while the players were typing, and a “typing icon” above their head.
Not only does this improve communication amongst players, but it also adds more depth to the chat system and makes conversation flow without awkwardly waiting to see if a player is actually replying.
This should honestly be a built-in feature, there is no way to make a “typing” icon without overlapping with the existing chat bubbles. Something like the voice chat icon (the one that fuses with the chat bubbles) would be perfect for this.