Bitcoin Rainbow Chart Defines Price Range of BTC in Colour Bands

The Bitcoin Rainbow Chart is a long-term valuation tool used for Bitcoin. It uses a logarithmic growth curve to forecast the potential future price of bitcoin. Additionally, it uses rainbow color bands to highlight market sentiment at different rainbow color stages as prices move through them.

Using logarithmic charts and color bands, it highlights potential opportunities to buy or sell Bitcoin. However, these charts are only recommended to be used for educational and entertainment purposes and no trade advice is guaranteed using these charts. Moreover, there is no evidence of past performances fitting within the Rainbow Channel continuing to fit into the future.

Till date, Bitcoin prices have remained within the color bands of the logarithmic growth channel.

Basics of Bitcoin Rainbow Chart

Different colors of bands form an indication of whether the prices are currently undervalued or overvalued. A logarithmic chart is used instead of a linear chart to support a better visualization of Bitcoin’s long-term growth trajectory. The lighter colors indicate a buying zone and the darker colors represent a selling trajectory. It is a vibrant tool to offer insights into the price trend.

Implications of various color bands

Dark Red

In this trajectory, Bitcoin prices are extremely overextended, and Bitcoin prices are likely to drop after this.

Red 

In this trajectory, Bitcoin is overbought and traders should consider booking profits.

Dark Red and Red are collectively known as maximum bubble territory, as prices are exaggerated in this territory.

Dark Orange

In this zone, buyers are dominating the markets and other traders might feel fear of missing out on the available opportunity.

Light Orange

In this zone, markets are considered to be balanced for Bitcoin.

Dark orange and light orange collectively answer the question “Is this a Bubble?” as they form a transitional territory.

Yellow

In this price trajectory, investors are expected to hold their Bitcoin holding for an extended period. Yellow is often referred to as “HODL” territory as it does not signify any of the upcoming directions.

Light Green

On this trajectory, investors can invest and enter the Bitcoin market.

Green

It is considered to be a good spot for accumulating a Bitcoin position for an extended period.

The light green and green bands are collectively referred to as still cheap, so investors can still make the buying decision in this territory.

Light Blue

It is a very good buying opportunity for bitcoin. It is commonly referred to as the “Buy” trajectory.

Blue

In this trajectory, Bitcoin prices are highly undervalued. It is referred to as “Basically a Fire sale”. This trajectory is rarely achieved. However, if it occurs, it is a prime opportunity for investors to buy.

History of Rainbow Chart

A user named Trolololo introduced the Bitcoin Rainbow Chart in 2014 using logarithmic regression. It was first made public on the popular forum Bitcoin Talk. After this, Bitcoin community members approved it. Eventually, the community started referring to it as a rainbow chart.

Bitcoin Halving

The Bitcoin Halving dates are marked on the rainbow chart because Bitcoin prices were on a lower trajectory at the time of halving. Then, proceed to the upper band within the halving cycle of 4 years. It will be quite interesting to see if the chart follows the same trend during the next halving.

The Precision of the Bitcoin Rainbow Chart

The accuracy of the Bitcoin Rainbow chart is constrained by its dependence on historical prices and assumptions made by the creators. The chart correctly offers a colorful and straightforward depiction of Bitcoin’s price. However, it fails to consider external influences like regulatory shifts or major global economic events.

Its popularity among the crypto X (Twitter) community is more attributable to its meme-like appearance than to its use as a definitive analytical tool for serious investment decisions.

The chart is perceived as a more general and playful overview of price movements, in place of a precise or comprehensive market analysis tool.

Summary

This rainbow chart employs a horizon of colorful bands, each of which refers to different price ranges. However, these price bands are arbitrary and do not fully replicate the current price trends. Hence, do not suggest accurate future price projections.

It is a visually engaging tool to understand the price movements in Bitcoin. However, it offers a simplified view and not an in-depth analysis. Its color bands provide a general perspective on the ongoing price range and market trends.

This tool is accessible but not a definitive guide to Bitcoin valuation.

FAQs

When is the next halving schedule?

The next halving is scheduled for April 2024.

Which round of Halving will Bitcoin experience in 2024?

Bitcoin will experience a fourth round of halving.

What is the expected range of the next Bitcoin halving?

In the next halving event, 6.25 BTC will be converted to 3.125 BTC.

Adarsh Singh is a true connoisseur of Defi and Blockchain technologies, who left his job at a “Big 4” multinational finance firm to pursue crypto and NFT trading full-time. He has a strong background in finance, with MBA from a prestigious B-school. He delves deep into these innovative fields, unraveling their intricacies. Uncovering hidden gems, be it coins, tokens or NFTs, is his expertise. NFTs drive deep interest for him, and his creative analysis of NFTs opens up engaging narratives. He strives to bring decentralized digital assets accessible to the masses.