The Ethereum Rainbow Chart is a long-term valuation model for the Ethereum blockchain network. This model is valid for all networks that follow the principle of “Moore’s Law”. The Ethereum Rainbow Chart uses a growth curve to help predict the future valuation and direction of ETH price.
What is ETH Rainbow Chart?
The Ethereum Rainbow Chart is a logarithmic regression valuation model used by investors to determine whether the Ethereum price is overbought or oversold based on past price trends. The emergence of this model, also known as the ETH Rainbow Chart, dates back to 2014, the release of ETH.
Although it has similarities with the Bitcoin rainbow chart, the ETH rainbow chart is considered less reliable due to its shorter price history. This pattern helps predict what direction the Ethereum price will take in the future. In doing so, it uses a logarithmic growth curve. It also compares its relative strength with previous points in the past.
The Ethereum rainbow chart was created by an anonymous user in early 2017. Although the original post has been deleted, the graphic can still be found on various forums and websites.
How To Read Ethereum Rainbow Chart
While a logarithmic valuation model may seem complex, the ETH Rainbow Chart helps traders simplify the underlying message of the data. The 9 different ranges on the model mean the following for the Ethereum price:
- Dark red:In the foam zone
- Red:Overbought zone, selling may be considered
- dark orange:Investors do FOMO
- Orange:It’s overbought
- Yellow:HODL means it’s neutral
- Light green:The direction goes up, leaving the fixed zone
- Green:In the fixed (accumulation) region
- blue green:Buy zone (market worried)
- Light purple:Oversold (buying opportunity)
What is the Difference Between Bitcoin and Ethereum Rainbow Chart?
While there are many similarities between the Bitcoin rainbow chart and the Ethereum rainbow chart, there are also differences. The biggest difference between BTC and ETH rainbow charts is the time frame. The BTC rainbow chart is based on 2010, while the ETH rainbow chart is based on 2014 only. This means that the ETH rainbow chart is much less reliable than the BTC rainbow chart.
