To make timing and prediction of bitcoin entries and exits easier, many crypto traders have tried to create various models and indicators to help time and predict future bitcoin prices and help price bitcoin in viewpoint.
The Rainbow Chart by Bitcoin is a tool created by traders to help them predict, time, and price Bitcoin approximately. It uses the behavior of bitcoin in past market cycles. Although short-term speculators mainly drive the crypto markets, many individuals hold on to their cryptocurrencies for the long haul.
These traders aim to purchase Bitcoin as the bear market draws to a close and then retain it for an extended duration, ideally until the conclusion of the bull market.
The Rainbow chart is a useful tool for traders to overlook the day-to-day fluctuations in the price of Bitcoin and gain a broader perspective of its value over time. The chart offers various insights to users, but its most prominent feature, as suggested by its name, is the rainbow effect.
The rainbow chart was created to provide a fun and informative tool for making trading decisions. Each rainbow color corresponds to a specific instruction, indicating whether one should buy, sell, or hold a particular asset. This system helps traders easily identify market trends and make informed decisions based on the chart’s color patterns.
The rainbow chart offers a user-friendly approach to understanding market trends and making trading decisions by simplifying complex financial data into a colorful visual representation.
The Evolution of the Rainbow Charts by Bitcoin
The rainbow chart was created by Azop, a Reddit user, to show Bitcoin prices from a comedic view. Although The Rainbow Chart proved to be an efficient prediction tool for a period, it took only a short time before a Bitcoin Talk user, Trolololo, introduced a new updated version. In addition, logarithmic regression was incorporated into The Rainbow Chart in the updated version, further improving its accuracy.
Incorporating logarithmic growth into the Bitcoin rainbow chart has endowed it with versatility that extends beyond the present. Even now, the model continuously adjusts itself based on new pricing data, which leads to an increasingly accurate performance over time.
Trading Using Bitcoin Rainbow Chart
The rainbow chart includes colors corresponding to specific trading decisions when the price reaches these color-coded regions. Here are the meanings of all the colors on the chart:
Prices are perversely high in the red region. Therefore, users are advised to sell and keep selling. Since the red region has no maximum value, the selling possibilities are limitless.
Orange- Bull market peak!
The orange region shows the first take profit regions for conventional traders. But, unfortunately, it also indicates the beginning of Fear-of-missing-out fueled conventions.
This region tells users to be patient with higher prices. It indicates prices need to be more expensive to make profits and cheap enough to buy.
This region indicates the risk-free region allows a user to invest while still early before transitioning into a riskier region.
Blue- Buy due to lower prices!
This region is best for excited traders to buy Bitcoin due to lower prices. However, after this region, prices will continue to fall.
In conclusion, The Rainbow model has been effective for traders since its creation and will likely remain a valuable asset for anyone seeking to make informed decisions in the evolving realm of cryptocurrency trading.