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Many long-term Bitcoin investors rely on tools like the Bitcoin Rainbow Chart to gauge where BTC stands in the market cycle. According to the latest readings, Bitcoin is still in the “cheap” zone—but does that mean now is the perfect time to buy, or should investors proceed with caution?

What Does the Bitcoin Rainbow Chart Show?

The Bitcoin Rainbow Chart is a logarithmic growth model that visualizes long-term trends in Bitcoin’s price, using color-coded bands to indicate different risk levels. Right now, BTC is still in a relatively low-risk zone, and the chart has yet to enter the upper “sell” areas.

For comparison:

In previous bull cycles, Bitcoin surged into the “Seriously Sell!” zone.
This time? We haven’t even reached the “Is this a bubble?” level yet.
Translation? There could still be plenty of room for growth. 🚀

RSI & Bitcoin Dominance – Mixed Signals Ahead

While the Rainbow Chart suggests that Bitcoin is undervalued, other indicators paint a more complex picture. Two key metrics to watch are the Relative Strength Index (RSI) and Bitcoin Dominance (BTC.D).

✅ RSI Trend:

In past bull markets (2017 & 2021), Bitcoin’s weekly RSI stayed above 70 for an extended period—signaling an overheated market.
This time? RSI was above 70 for only six weeks and has now dropped below 50—suggesting a correction rather than a market top.

✅ Bitcoin Dominance (BTC.D):

Historically, Bitcoin dominance falls as investors shift their funds into altcoins during market peaks.
This cycle? Bitcoin dominance keeps rising, meaning the market is behaving differently than in previous bull runs.

What Does This Mean for Investors?

While the Rainbow Chart suggests BTC is still cheap, other indicators point to continued uncertainty. The price could continue climbing, but a correction like in summer 2021 is still a possibility. If Bitcoin were to drop 50% from here, it could revisit levels around $54,000.

For long-term holders, this isn’t a red flag—it simply confirms that Bitcoin hasn’t yet reached peak euphoria. For short-term traders, however, it’s essential to prepare for potential volatility.

Final Thought: Time to Buy or Wait?

If history tells us anything, buying when the Rainbow Chart is in the lower zones has historically been a solid strategy. But, as always, DYOR (Do Your Own Research) and never invest more than you’re willing to lose.

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Madeline

I have been drawn to technology and science fiction since I was a child. Studying IT has drawn me to the world of cryptocurrencies, where I have been working since 2014. I have learned a lot since then. And I still have a lot to learn. What fascinates me most about them is that they connect so many worlds together and the possibility of free choice. Without limits.