Ethereum is not only a currency but also a platform that enables smart contracts and dApps. It’s the future of decentralization, and it’s growing fast. But investing in ETH and predicting its price can be tricky and risky.

That’s where the Ethereum rainbow chart comes in. The price chart from BlockchainCenter shows how the digital asset has moved over time. The rainbow chart shows that Ethereum is now in the ‘Fire Sale’ zone. This is the Blue Zone and goes from $0 to $2,320.

Key Takeaways:

  • It is a way to see ETH’s price movements and patterns using a colorful curve.
  • The Ethereum rainbow chart shows you if ETH price is cheap or expensive right now, based on its history and growth potential.
  • It is just a visualization tool and does not guarantee any price prediction.

What is the Ethereum rainbow chart?

It is based on the idea that Ethereum has a long-term exponential growth curve, like Bitcoin. The chart uses a logarithmic scale to show this trend better and draws color bands that show different price levels of ETH.

These colors go from blue (very undervalued) to Magenta (very overvalued), giving color bands a possible entry or exit point for investors.

The Ethereum rainbow chart is helpful for investors because it helps them to see whether Ethereum is now bearish or bullish compared to its historical trend.

It also helps them to avoid emotional decisions based on fear or greed and to follow a logical and data-based approach.

By using the Eth rainbow chart, investors can better know when to buy low and sell high, when to hold or buy more, and when to avoid FOMO (fear of missing out) or panic selling.

Related Article: Best Ethereum Projects

How to read Ethereum rainbow chart?

The Ethereum rainbow chart is a visual tool that shows nine colors representing different ETH price levels based on a log regression formula.

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The formula changes from time to time to match the historical prices as best as possible. The chart also displays the current ETH price and the period of the data used.

Each color on this rainbow chart has a different meaning. Let’s explore:

Current Ethereum Rainbow Chart
  1. Blue or “Fire Sale”: Best time to buy Ethereum as it is a very cheap and rare opportunity.
  2. Light Blue or “Undervalued”: Ether is still undervalued and offers a very good buying opportunity.
  3. Green or “Accumulate”: Accumulate more ETH tokens if you are not scared of short-term changes.
  4. Light Green or “Still Cheap”: Good time to buy cheap ETH tokens if you believe in its long-term future.
  5. Light Yellow or “AltSeason”: Time when many people may choose to hold (HODL) their Ethereum and wait for more information or direction.
  6. Yellow or “Is this The Flippening?”: ETH is going towards the overbought zone, and you may not be 100% sure about buying or selling.
  7. Orange or “But have we *earned* it?”: Feel fear of missing out (FOMO) and buy Ethereum at high prices, hoping for more money.
  8. Red or “Go back to BTC?”: The price of Ethereum is still high and overpriced. It indicates you take your profits and leave.
  9. Magenta or “Maximum Bubble Territory”: The price of ETH is in the bubble zone. It is likely to go down soon. 

Who Created the ETH Rainbow Chart?

The Eth rainbow chart is a tool made by @rohmeo_de that shows investors the possible future direction of Ethereum’s price. He got the idea from the Bitcoin Rainbow Chart.

What Ethereum Price Does the Rainbow Chart Predict?

It shows a range of possible prices based on how Ethereum grows over time. The rainbow chart uses colors to show if ETH is too expensive or too cheap at any moment compared to the normal growth curve.

The chart does not tell you the exact price of Ethereum, but it helps you to see the big picture and ignore the short-term fluctuations.

What is the Difference Between BTC and ETH Rainbow Chart?

Bitcoin Vs Eth

The Bitcoin Rainbow Chart goes back to 2010, while the Ethereum Rainbow Chart only goes back to 2015. This means that the ETH Rainbow Chart needs more data and history to base its forecasts on.

The creator of the Ethereum Rainbow Chart adjusted the formula until it matched the price development fairly well. However, the BTC rainbow chart was based on the exact formula.

Summary

To summarize our Ethereum Rainbow chart explanation, we saw that It could be used for the bearish and bullish movement of ETH based on historical trends.

However, this rainbow chart is not a reliable predictor of the exact price movements of Ethereum. It is based on a simplified formula that only accounts for some factors influencing the cryptocurrency market.

Disclaimer: Don’t take the Ethereum rainbow chart as a serious investment advice. It’s just a visualization tool to see how ETH grows over time. But it’s not a magic crystal ball that tells you the price prediction of ETH. You still need to be careful and do your homework before you invest.