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Knowing when to buy or sell cryptocurrency is always going to be tricky and requires ample research into recent trends, as well as the state of your preferred currency. Looking at past pricing trends can be helpful when making future investment decisions. In 2014, a crypto rainbow chart was created for Bitcoin to highlight the evolution of Bitcoin’s price. This chart has been used by many BTC investors to predict when the market may enter bear or bull territory. The following guide takes an in-depth look at the Bitcoin rainbow chart and when you should consider using it.
The Bitcoin rainbow chart is a basic logarithmic regression chart that denotes how the Bitcoin price has evolved over time. This crypto rainbow chart uses colored bands to indicate when it may be time to buy, sell or hold.
The first component of the Bitcoin rainbow chart was created in 2014 by Reddit user azop. At this stage, the rainbow color chart was placed online to show the Bitcoin trending price. This chart was only designed to be a fun and interesting graphic that other Bitcoin investors might enjoy taking a look at. Because of how colorful and surprisingly accurate the chart turned out to be, it was given the name "Bitcoin rainbow chart."
Later that year, a logistic model known as logarithmic regression was introduced by a BitcoinTalk user named trolololo. This statistical model indicates a situation where decay or growth accelerates rapidly at the beginning before slowing down over time, which is a trend that many cryptocurrencies adhere to. Once the algorithmic regression was applied to the BTC logarithmic chart, the rainbow had a curve to it. At the beginning of the chart, the curve rose sharply before beginning to eventually level out.