High profile investors see 2025 as an important year for Bitcoin, with forecasts reaching six to seven figures driven mainly by global adoption and institutional cash flow. But will in fact 2025 reveal to be that year for Bitcoin?
Although fundamental analysis is an important part of researching an asset, in the crypto world things trend to work a little bit different comparing to traditional markets. In the crypto search for "price action answers" techinical analysis seem to have an advantage comparing to news, noise and other funadamental analysis. Amongst many great indicators and tools availabe out there one that has impressed the most is the Bitocin Rainbow Chart which was created by Reddit user azop back in 2014. Since then, the Bitcoin rainbow chart has been considered a valuable tool in the Bitcoin community and for a good reason.
The Rainbow price chart is a long-term valuation tool for Bitcoin. It uses a logarithmic growth curve to forecast the potential future price direction of Bitcoin. It overlays rainbow color bands on top of the logarithmic growth curve channel to highlight market sentiment at each rainbow color stage as Bitcoin price moves through it. Therefore indicating potential opportunities for the Bitcoin investor using the chart.(Bitcoin Magazine Pro.)
How to Interpret The Rainbow Chart?
The live BTC rainbow chart highlights where BTC price is in those cycles and provides a viewpoint on investor strategy. Warmer upper colors of the rainbow chart show when the market is likely overheated. Such periods have historically proven to be good times for the strategic investor to begin taking some profits. Cooler colors indicate periods where overall market sentiment is typically depressed and many investors become uninterested in Bitcoin. The Rainbow chart highlights that these periods are typically excellent times for the strategic investor to accumulate more Bitcoin.
Important points to considered about the Bitcoin Rainbow Chart are as follows:
It uses historical price data as its input to project the direction of the rainbow bands and it does not use any blockchain data to try and identify what different market participants are doing in the Bitcoin ecosystem.