Bitcoin still ‘cheap’ according to Rainbow Chart, is this the buying moment?

Many Bitcoin investors use a long-term strategy and use tools such as the Bitcoin Rainbow Chart. This graph gives an indication of where Bitcoin is in the market cycle. Based on the current measurements, Bitcoin is still “cheap” according to the Chart. But does this mean that it is now the time to buy, or is there more going on?

What does the Bitcoin Rainbow Chart show?

The Bitcoin Rainbow Chart is a Logarithmic growthigraphic that visualizes long -term trends from Bitcoin with different color zones. At the moment BTC is still in a relatively low risk wire and the graph has not yet reached the highest zones.

For comparison: in earlier cycles, Bitcoin rose to “Seriously Sell!”-area, while the current cycle has not even tapped the “Is this a bubble?”-level. This could mean that there is still room for further growth.

RSI and Bitcoin dominance show mixed signals

In addition to the Rainbow Chart, there are other indicators that paint a broader picture of the market situation. Two of the most important are the Relisive Strength Index (RSI) and the Bitcoin dominance (BTC.D).

• RSI-TREND: In the Bullruns of 2017 and 2021, the weekly RSI remained over 70 for a long time, which was a signal for an overheated market. This time the RSI was only six weeks above 70 and has since dropped below 50. This points to a correction rather than a market top.
• Bitcoin dominance: Bitcoin’s dominance fell in earlier market picks, because investors pumped their money in Altcoins. This time the Bitcoin dominance continues to rise, which suggests that the market behaves differently than in previous bullruns.

What does this mean for investors?

Although the Bitcoin Rainbow Chart suggests that Bitcoin is currently cheap, other indicators show that there is still uncertainty. The rate can rise further, but a correction, as in the summer of 2021, also remains a possibility. A decrease of 50% could bring Bitcoin back to around $ 54,000.

For long-term investors, the current trends seem reassuring because they show that Bitcoin is not yet in a euphoric phase. For short-term traders, however, it is important to take possible volatility into account.

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