Key Takeaways:
- The Bitcoin rainbow chart is a Bitcoin price movement chart that can help traders and investors to see whether the Bitcoin is overbought or oversold.
- The Bitcoin rainbow chart using colors as an indicator. Each color category has a different meaning.
- This chart helps you to know what steps should be taken in investing in Bitcoin.
What Is the Bitcoin Rainbow Chart?
The Bitcoin rainbow chart is a Bitcoin price movement chart that can help traders and investors to see whether the market is overbuying or oversold. This chart was founded by an early Bitcoin investor with the username 'Azop' on Reddit in 2014.
This chart helps traders and investors understand when is the right time to buy or sell Bitcoin now and in the future. Since the rainbow chart price movement shows a long-term trend, the chart also displays information regarding past actions that traders should have taken. The Bitcoin rainbow chart can serve as a guide and an ideal source of trading information for those looking for the right entry points for long-term positions.
How To Read Bitcoin Rainbow Chart?
The Bitcoin rainbow chart has nine color categories; each color has a different meaning. The coin is oversold if the price is in the green to the blue zone. Meanwhile, if the Bitcoin price is in the orange, red, and purple zones, the BTC is overbought.
With this chart, we can find out when is the right moment to buy or sell BTC. So, when the Bitcoin price is in the blue/green zone, it could be the right time to buy it. It is time to sell Bitcoin when Bitcoin is in the orange, red, and especially purple zones. Knowing the condition of BTC based on these colorful indicators is much more fun to learn. Nevertheless, this chart provides helpful information for traders and investors who are interested in buying BTC.
Is the Bitcoin Rainbow Chart Accurate?
With all the information displayed by the Bitcoin rainbow chart, is the strategy shown on this chart accurate?
The data taken on the Bitcoin rainbow chart comes from historical data on Bitcoin price movements occasionally. That way, you can't use the Bitcoin rainbow chart to predict BTC prices.
The rainbow chart only determines two curve points, red and blue. While the color area between them only contains data adjusted for their upper and lower bounds.
Can I Use the Bitcoin Rainbow Chart as My Main Indicator?
The Bitcoin rainbow chart helps you to know what steps should be taken in investing in Bitcoin. However, it is also best to use other crypto indicators than only using this chart as the primary information for investment decisions. There are several other price indicators that you can use to determine the trading strategy that you will do, both short and long-term.
Conclusion
The Bitcoin rainbow chart does not provide investment advice. Past performance does not predict future outcomes. The Bitcoin rainbow chart is intended to be a fun method to look at historical long-term Bitcoin price fluctuations.
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