Key Points
- Bitcoin’s Rainbow Chart suggests that BTC is closer to the bottom than the top, indicating a potential buying opportunity.
- The Net Unrealized Profit/Loss metric shows reduced selling pressure, suggesting room for price appreciation.
Bitcoin’s Rainbow Chart Indicates Potential Buying Opportunity
Thirteen months ago, Bitcoin [BTC] was trading at $25.7k. Last September, the market was in despair and the halving event was at least seven months away.
The sentiment shifted in October amid rumors of a potential spot ETF approval from the SEC. Inflation also appeared to have peaked. These factors contributed to Bitcoin’s attractiveness to potential buyers, and the prices trended higher to reach an all-time high of $73.7k in March 2024.
Bitcoin Rainbow Chart Encourages Investors
The Rainbow Chart is a fun way of looking at the long-term price trends of Bitcoin. It uses a logarithmic scale to plot Bitcoin’s price, and color codes them to show investors whether they should be buying, selling, or HODLing.
While in recent months it has fallen towards the “Bitcoin is dead” territory, it has not quite reached the ideal buy zone yet. However, BTC is still within a good buy zone, with the Bitcoin Rainbow Chart describing it as “a fire sale.”
Comparing this cycle’s performance with the previous one, the latter half of October could be when Bitcoin embarks on a strong rally. This rally could be the bull run that follows a halving event.
Decreased Selling Pressure Could Lead to Price Appreciation
At press time, the Net Unrealized Profit/Loss metric was at 0.47 – A sign that the market cap was greater than the realized cap. Therefore, a good portion of holders may still be in profit, even though the price has been trending south over the past six months.
The NUPL fell alongside the price too, showing that the intention to sell from holders in profit is likely in a decline. This suggests there is room for price appreciation in the coming months. A NUPL reading above 0.7 generally marks the cycle top.