After a recent dip, Bitcoin is showing strength near $110,000. Are we nearing a peak or is this the start of a new rally? A detailed analysis of the Rainbow Chart unveils intriguing insights.
The Bitcoin (BTC) recently experienced a decline but now seems to be gaining momentum as it approaches $110,000, nearing its all-time high of $112,000. The big question is whether we are heading towards a new peak or if this is just the beginning of a bigger rally.
To assess the long-term value of Bitcoin, investors often refer to the famous Rainbow Chart. What does this colorful representation of the current price indicate? Is BTC in a buying zone, or is the cryptocurrency overvalued?
At its current price of $110,000, Bitcoin is in the HODL zone of the Rainbow Chart, an intermediate band indicating fair valuation compared to its growth history.
This chart, based on a logarithmic scale, divides Bitcoin’s price evolution into colored zones, ranging from extreme undervaluation to speculative overvaluation. The HODL zone, an iconic term in the crypto community meaning “hold for the long term,” suggests that Bitcoin is neither in a speculative bubble nor in a phase of buying at low prices.
This neutral position implies that it is not urgent to sell as the market shows no signs of overheating. For hodlers, this phase is ideal for maintaining their positions, while new investors may consider gradual purchases to mitigate risks associated with volatility.
In a bullish market context, the Rainbow Chart identifies several key levels:
Conversely, if the market turns bearish, the Rainbow Chart suggests that a drop below $33,000 would put Bitcoin in an extreme undervaluation zone. This level, well below the current price, would present a massive buying opportunity for long-term investors. However, such a scenario seems unlikely in the short term, given the current dynamics and Bitcoin’s resilience to recent corrections.
The Rainbow Chart is valued for its simplicity and ability to provide a long-term perspective on Bitcoin, considering its historical market cycles. Here’s why it’s an essential tool:
According to it, Bitcoin is currently in a neutral to slightly optimistic zone. There are no signs of overheating yet, but there are also no indications that the cryptocurrency is extremely undervalued. As long as the price remains in this “HODL zone,” patient holding seems to be the most logical choice, with many long-term growth prospects.
Charles Ledoux is a Bitcoin and blockchain technology specialist. A graduate of the Crypto Academy, he has been a Bitcoin miner for over a year. He has written numerous masterclasses to educate newcomers to the industry and has authored over 2,000 articles on cryptocurrency. Now, he aims to share his passion for crypto through his articles for InvestX.
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