Key Points
- Bitcoin’s Rainbow Chart reveals a buy signal, indicating that the cryptocurrency is ‘still cheap’.
- Despite recent losses, Bitcoin’s RSI and dominance trends differ from previous cycle highs, suggesting it’s not close to a top yet.
Bitcoin [BTC] has recently experienced losses, despite positive developments such as the Spanish banking giant BBVA offering Bitcoin and Ethereum [ETH] trading to its clients.
The Bitcoin Rainbow Chart, a visual tool for tracking long-term Bitcoin trends, currently suggests that the cryptocurrency is “still cheap.”
Bitcoin’s Current Cycle Differs from Past Cycles
In the past two cycles, the Rainbow Chart touched the “Seriously sell!” zone. However, this time around, it hasn’t even reached the “Is this a bubble?” zone. This, along with other differences in price action, suggests that we are not near a cycle top yet.
The goal for many investors is to ride the uptrend, sell around the top, and buy during the bear market. In 2017, the weekly Bitcoin RSI remained above 70 for several weeks as the price hit new highs. In 2021, however, there was a bearish divergence between the price and the RSI.
Current RSI and Dominance Trends
Recently, the RSI was above 70 for six weeks before falling below the neutral 50, mirroring the 50% correction seen in summer 2021. A similar correction could bring Bitcoin down to $54k.
Bitcoin Dominance, or BTC.D, behaved differently during the past two cycle tops, hitting multi-month lows. Currently, it is trending upwards, reaching levels not seen since March 2021.
Investors should be cautious of potential steep price drops. However, the current dominance and RSI trends, which differ from past cycle tops, may offer reassurance to long-term investors.
