Bitcoin's Fair Value: $87,000! The Price Point Indicated by the Rainbow Chart

▲ Bitcoin (BTC) ©Godasol

The Bitcoin (BTC) Rainbow Chart suggested a fair value of $87,000 for the 30th of this month. While this calculates to an approximately 11% potential increase from the current price, the Relative Strength Index (RSI) has entered an overbought zone, raising the possibility of short-term consolidation or profit-taking.

According to cryptocurrency media outlet Finbold on September 1 (local time), the "HODL" band, which is the central fair value zone of the Bitcoin Rainbow Chart, was formed at approximately $87,000 at the end of September. Considering the price was about $78,000 at the time of writing, this implies an upside potential of about 11% if it returns to the long-term trend line over the next four weeks.

The Rainbow Chart is a long-term logarithmic regression model that illustrates Bitcoin's historical growth trajectory. It is not a tool for predicting short-term price movements but rather a criterion used to assess whether the current price is lower than, fair to, or higher than its long-term valuation trend. Currently, Bitcoin is situated between the 'Still cheap' zone and the HODL zone, indicating it is below the model's fair value.

As of the 30th, the lowest 'Basically a Fire Sale' zone starts at approximately $26,800. The 'BUY' and 'Accumulate' zones are at $36,000 and $48,300 respectively, while the 'Still cheap' zone begins at $64,800. These price ranges have historically coincided with periods of extreme pessimism or accumulation by long-term investors.

Above the fair value, the 'Is this a bubble?' zone starts at $117,000, and the 'FOMO intensifies' zone is indicated at $157,000. The 'Sell. Seriously, SELL!' zone, which coincided with profit-taking periods, is at $211,000, and the 'Maximum Bubble Territory', representing the most excessive overvaluation, begins at $283,000.

At the time of writing, Bitcoin was trading at $78,001, down 0.7% from 24 hours prior and 1.6% from a week ago. However, it remained significantly above both the 50-day Simple Moving Average (SMA) of $67,601 and the 200-day SMA of $69,454, maintaining an overall upward trend. The 50-day SMA also positioned itself above the 200-day SMA, supporting the bullish structure. Conversely, the 14-day RSI entered the overbought zone at 70.44, which doesn't immediately imply a trend reversal but suggests vulnerability to short-term consolidation or profit-taking.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*