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Bitcoin Rainbow Chart says BTC is ‘still cheap’ – Should you buy more or not?

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Long-term investors can draw solace from the fact that the dominance and RSI trends did not match the previous cycle tops.
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Bitcoin Rainbow Chart says BTC is 'still cheap' - Should you buy more or not?
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  • Bitcoin’s Rainbow Chart revealed a buy signal after being in HODL territory since December
  • The RSI and dominance trends didn’t quite match with the previous cycle tops

Bitcoin [BTC] has suffered losses recently, despite a steady influx of seemingly positive news. One such example is news of the Spanish banking giant BBVA offering BTC and Ethereum [ETH] trading to its clients.

The Bitcoin Rainbow Chart is a logarithmic growth curve overlaid with rainbow colors to help visualize long-term Bitcoin trends. At the time of writing, it showed that the price was “still cheap.”

In previous two cycles, the chart has at least touched the “Seriously sell!” territory. This time, it hasn’t even tested the “Is this a bubble?” territory. Of course, we can’t base our investment choices on just the Bitcoin Rainbow Chart. However, there are a couple more dissimilarities with previous cycles and the prevailing price action – Signs that we are not close to a top yet.

Some reasons why you shouldn’t sell your BTC yet

Bitcoin 1-week Chart

Source: BTC/USD on TradingView

Assuming you aren’t holding Bitcoin for the next decade, it would be nice to ride the uptrend, sell roughly around the top, and accumulate throughout the bear market. Much easier said than done, though.

In 2017, the weekly BTC RSI was above 70 for multiple weeks as the price set a series of new, unbelievable highs. In 2021, the price and the RSI made a bearish divergence. Subsequently, the price fell by nearly 50%, before recovering and then entering the bear market.

In recent months, the RSI was above 70 for a total of six weeks, but quickly fell lower. It has since fallen below neutral 50, resembling the 50% correction BTC saw in the summer of 2021. A similar sized correction could take BTC to $54k.

Bitcoin Dominance Chart

Source: BTC.D on TradingView

Another dissimilarity with the previous two cycle tops was the behavior of Bitcoin Dominance. The BTC.D has been near multi-month lows during the past two cycle tops. Right now, it is on an uptrend, making new highs not seen since March 2021.

Therefore, investors must be wary of further, steeper price drops. And yet, long-term investors can draw solace from the fact that the dominance and RSI trends did not match the previous cycle tops.

 

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Akashnath Sumukar works as a Senior Journalist at AMBCrypto. Based in Chennai, India, he has been an avid follower of the cryptocurrency market since Bitcoin’s boom and bust cycle of 2017. A graduate in Chemical Engineering, he is an expert in technical analysis. In fact, Akashnath has a particular interest in reading price charts and predicting how an asset will move over the short and long term. A self-taught trader and as someone who holds cryptos himself, he is always on the lookout for the next opportunity he can possibly capitalize on, while also educating his audience.
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