Bitcoin Rainbow Chart
The Rainbow Chart is a long-term valuation tool that uses a logarithmic growth curve to forecast the potential future price direction of BTC.
How Rainbow Chart Works
Originally featured on Blockchain center, the Bitcoin Rainbow Chart overlays color bands on top of the logarithmic regression curve 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.
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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.
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.