What is the Bitcoin Rainbow Chart?
The Bitcoin Rainbow Chart is a logarithmic regression curve with the colors of the rainbow inserted to help determine the best buy-in and sell price for Bitcoin. It also offers an easy-to-understand graphic for the future potential movement for Bitcoin.
The "rainbow color" bands used in the chart are used to highlight the market sentiment and the best Buy-in price (blue color band) and sell price (red color band).
While the Bitcoin Rainbow chart is a novel and colorful approach to understanding the price movements of Bitcoin, it was originally created for entertainment purposes.
In the eight years, the Bitcoin rainbow chart has been around it has become a very reliable indicator for the price movements of Bitcoin.
When to Buy & Sell Using the Bitcoin Rainbow
As the name suggests, this chart consists of a rainbow of colors, nine bands in total with the lowest band blue and the highest band red. While there have been detailed interpretations of how to assess each of the colors in the bands, the simple approach is to use a three-color system:
- Blue = Time to Buy
- Yellow = No action
- Red = Time to Sell
The use of logarithmic charts within stock and cryptocurrency trading has been a popular method used for price prediction. The popularity of the Bitcoin Rainbow chart has increased over the years for its ease of understanding and overall reliability.
Bitcoin Halving & The Bitcoin Rainbow Chart
Within the Bitcoin rainbow chart can be seen a 4-year cycle from low to all-time high prices which have been attributed to the Bitcoin halving cycle. The Bitcoin halving cycle is another important factor to consider when determining the probability of Bitcoin's future price movement.
The Origin of the Bitcoin Rainbow Chart
The first known iteration of the Bitcoin rainbow chart was in 2014 by the Reddit user azop. The rainbow colors were added to the chart and the post became very popular becoming nicknamed the "Bitcoin rainbow chart".
Later on in the year, logarithmic regression was introduced into the chart by BitcoinTalk user trolololo.
The addition of the logarithmic regression takes into account rapid growth (adoption) at the beginning of the curve and then flattening over time. It was at this point in time the curve was added to the Bitcoin rainbow chart.
It should be noted the origin of the Bitcoin rainbow chart was simply to offer a fun and interesting method to chart the price of Bitcoin and while it was never intended to be a predictive model it has remained relatively accurate since its creation.
Future Price Prediction for Bitcoin?
According to the early creator of the Bitcoin Rainbow chart (Trolololo), the price of bitcoin should reach $1,000,000 on or around September 6th, 2026.
The Bitcoin rainbow chart is based on logarithmic regression which has proven to be quite reliable over the last 8 years in which it has been around. It is important to note that the rainbow chart is not necessarily a predictor of future value. When using analysis tools, it's always a good idea to use multiple analysis tools and sources of data before making a determination on the future price movement of Bitcoin.
Fear & Greed & The Bitcoin Rainbow Chart
Another important factor when assessing the future price movement of Bitcoin is market sentiment. Market sentiment for the cryptocurrency market has been calculated and tabulated into what is commonly referred to as the Fear and Greed index.
Learn to Profitably Invest in Crypto
The cryptocurrency market is highly volatile and emotional. Yet, we have seen clear patterns within the price of Bitcoin and the cryptocurrency market as a whole.
As an investor, cryptocurrencies can offer the ability for life-changing wealth however, it's necessary to be well aware of the market cycle and trends in which you are investing in.
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