What Is The Bitcoin Rainbow Chart Indicator?
The Rainbow Chart is a long-term valuation tool for Bitcoin. It uses a logarithmic growth curve to forecast the potential future price direction of Bitcoin.
It overlays rainbow color bands on top of the logarithmic growth curve channel in an attempt to highlight market sentiment at each rainbow color stage as price moves through it. Therefore highlighting potential opportunities to buy or sell.
As with all the charts on this website, the Rainbow chart is not investment advice. It is for educational and entertainment purposes only. There is no guarantee that past performance fit within the rainbow channel will continue to play out in the future.
To date, bitcoin price has continued to stay within the rainbow color bands of the logarithmic growth channel.
How to Interpret The Rainbow Chart
Because Bitcoin is still a relatively young asset class, its price movements are highly volatile. Although on a macro timeline Bitcoin is being adopted, which we can see in the general upwards price movement, it does experience market cycles. During these market cycles, the price of Bitcoin can increase parabolically and also drop very quickly. It also has very high daily volatility which investors need to be aware of.
The BTC rainbow chart highlights where BTC price is in those cycles and provides a viewpoint on investor strategy. As mentioned earlier in this article, this chart and its legend labels are for entertainment purposes and do not constitute investment advice.
The warmer upper colors of the rainbow chart show when the market is likely overheated. Such periods have historically proven to be good times for the strategic investor to begin taking some profits.
When price today is down towards the cooler colors, overall market sentiment is typically depressed and many investors become uninterested in Bitcoin. The Rainbow chart highlights that these periods are typically excellent times for the strategic investor to accumulate more Bitcoin.
This Rainbow chart updates every 24 hours with the latest daily close price live, and will always be available to view on this page for free.