Bitcoin rainbow charts

Bitcoin Rainbow Chart: Everything You Need to Know

On the 3rd  of January 2009, Bitcoin was launched in the market as a result of the distrust in the centralized control of currency and the traditional financial system. In contrast, many cryptocurrency enthusiasts believe it will one day replace traditional money.

Since the beginning, cryptocurrency experts have been looking for ways and strategies to understand Bitcoin volatility and use the data to predict future prices. To that end, Bitcoin Rainbow Chart was introduced and proved an effective method for predicting the changing market trends, volatility, and long-term price changes.

This article will help you to learn more about Bitcoin rainbow charts, how to read them, and how to use the data for future Bitcoin investments.

Bitcoin Rainbow Chart: A Brief Introduction

Technically, the Bitcoin rainbow chart is a basic logarithmic growth curve that shows the regression in the prices of Bitcoin over time. It consists of multi-colored bands, indicating when is the right time to purchase, sell, or hold on to Bitcoin. The rising color in the chart is red, which shows the increase in Bitcoin’s prices, while the lowest color band is blue, which shows the decrease in Bitcoin prices.

Subsequently, the Bitcoin rainbow chart is a long-term evaluation tool that can provide essential information to investors and traders  alike to build a strategic plan based on the highlighted market sentiment at every rainbow color stage.

Moreover, until now, the prices of Bitcoin have remained inside the rainbow-colored bands of the logarithmic channels. Though the Bitcoin rainbow chart is meant to be a predictive tool, it has remained accurate since its establishment. You can free sign up to Bitcoin Primeblock to begin your trading career.

History of Bitcoin Rainbow Chart

In 2014, the first component of the rainbow chart was created by a Reddit user, “azop,” and updated online. Initially, the bitcoin rainbow chart Reddit was designed in a fun way to explore the prices of Bitcoin over the years. Due to the accuracy and colorfulness of the chart, it is named as Bitcoin Rainbow Chart.

Later the same year, a logarithmic regression was introduced by a Bitcoin Talk user, “trolololo.” This model stated how certain cryptocurrencies raised a bit before lowering down over time. Therefore, this curve was added to BTC logarithmic chart giving it a curve.

The Interpretation of Each Color in Rainbow Chart

Overall, the Bitcoin rainbow chart comprises 9 colors, with each having a different meaning:

  • Dark Red- the bubble can burst anytime.
  • Red-time to start selling
  • Dark Orange-the high intensity of FOMO
  • Orange-chances of becoming a bubble soon
  • Yellow-Time to hold
  • Light Green-price starts falling
  • Green-Cheap buy zone
  • Bluish Green-Start buying
  • Blue-Fire sale of Bitcoin

BTC Rainbow Chart Accuracy

The BTC rainbow chart provides recent information and compares the speed, adoption rate, and prices in the future. Therefore, there is no need for adjustments, nor can they be used for the BTC predictions.

The logarithmic regression lines show the increase and decrease of the market prices; however, if the prices lie between these bands, it is very unreliable.

On the contrary, the BTC rainbow chart has features that can help predict future market prices. Previously, fluctuations in the Bitcoin prices have shown that every time there was a halving, the prices shifted to the dark red band.

However, in the recent Bitcoin halving in May 2022, the prices shifted to the Dark Orange band, indicating it’s the time to sell it. According to experienced traders, the next halving of Bitcoin is expected in 2024.

Apart from Bitcoin, the rainbow chart is also applicable to other cryptocurrencies. For instance, the Ethereum rainbow chart can be used to get insights about its prices by ETH investors.

Analyzing Enter and Exit Trade with BTC Rainbow Chart

With the help of the correct interpretation of the rainbow chart, the traders can analyze the Bitcoin price fluctuations. They can use the natural logarithmic curve to guide the right time to enter the trading and when to exit.

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