- 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.
Source: Blockchain Center
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
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.
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.
