Ethereum Rainbow Chart

What is an Ethereum Rainbow Chart?

 

Just like a Bitcoin Rainbow Chart, the Ethereum Rainbow Chart is a long-term valuation tool forecasting the logarithmic growth of the Ethereum token concerning the market’s sentiment.

The Ethereum Rainbow Chart is unique as the logarithmic growth trend of the token is enclosed within a series of rainbow-color bars highlighting the market’s sentiment at each stage. Each color represents the market’s value and the sentiment driving the token at that point.

Remember, the Ethereum Rainbow Chart is not financial advice and is more of a tool that highlights the market’s sentiment throughout the various financial stages of the Ethereum token.

Interpreting the Ethereum Rainbow Chart

The price index for the Ethereum token is highly volatile as several sentimental and psychological factors influence this volatility. The Ethereum Rainbow Chart is a measure of such factors that are contributing to the volatility of the token as a result of the market’s overall sentiment.

The warmer upper colors usually show the point at which the market is overheated which indicates a potential opportunity for strategic investors to earn massive profits. However, the price of the token can parabolically increase and decrease.

Fundamentals of the Logarithmic Ethereum Rainbow Chart

 

The different colors of the bands indicate whether Ethereum is undervalued or overvalued. A logarithmic chart, rather than a linear one, is used to better visualize Ethereum’s long-term growth trajectory. Colder colors suggest a good buying opportunity, while hotter colors suggest a good selling opportunity.

  • Dark Red: The Ethereum market is extremely overextended, indicating a likely price drop.
  • Red: Ethereum is overbought; traders might want to take profits.
  • Dark Orange: Buyers dominate the market, and FOMO (fear of missing out) is building up.
  • Light Orange: The market is balanced, neither too hot nor too cold.
  • Yellow: A good time to hold onto your Ethereum investments.
  • Light Green: Ethereum is relatively cheap, a favorable buying opportunity.
  • Green: An ideal spot for accumulating more Ethereum.
  • Light Blue: An excellent time to buy ETH.
  • Blue: Ethereum is highly undervalued, representing a strong buying opportunity.