Bitcoin ‘Rainbow Chart’ Signals Buying Opportunity, But Weak Demand Raises Concerns

According to a recent post on X by crypto analyst Crypto Rover, the Bitcoin (BTC) Rainbow Chart is flashing a buy signal, suggesting that the leading cryptocurrency may be on the cusp of a significant upward move. However, weak market demand could pose a risk to this bullish momentum.

Bitcoin Rainbow Chart Flashes Buy Signal

After hitting a new all-time high (ATH) on May 22, BTC has spent nearly a month consolidating between the $100,000 and $110,000 range, without showing a clear directional bias. Now, one of the most well-known indicators – the Bitcoin Rainbow Chart – is pointing toward potential upside for the top digital asset.

Crypto Rover shared the following chart, showing BTC currently trading in the light green, or “buy”, zone of the Rainbow pattern. Historically, Bitcoin has often entered this zone shortly after each four-year halving, signalling potential growth ahead.

For the uninitiated, the Bitcoin Rainbow Chart is a long-term valuation tool that uses a logarithmic growth curve with color bands to show where Bitcoin’s price stands relative to historical trends. Each color band suggests a different market sentiment, helping investors identify potential overvaluation or undervaluation zones.

While the Rainbow Chart’s buy signal is promising, the broader demand for BTC appears lackluster. In a recent CryptoQuant Quicktake post, contributor Darkfost pointed out that sluggish demand is limiting Bitcoin’s ability to break out.

Darkfost shared the following chart, which compares new BTC supply to coins held inactive for over a year – used to gauge apparent demand. When the ratio moves above zero, it typically indicates strong market demand.

Since the last local top in May, this apparent demand metric has been gradually declining, though it remains sufficient to absorb current selling pressure. In essence, while BTC is managing to stay above the $100,000 level, demand is fading – a potential headwind.

However, some encouraging signs remain. In a separate X post, crypto trader Merlijn The Trader noted that the buy/sell pressure delta is showing an oversold signal, implying that short-term sellers could be nearing exhaustion.

BTC Wyckoff Accumulation Nearing End?

Crypto market commentator Ted Pillows added that BTC may be in the final stage of the Wyckoff Accumulation pattern. According to Ted, a decisive breakout above $110,000 could send Bitcoin surging to $130,000 “in no time.”

Overall, Bitcoin continues to demonstrate a healthy technical structure, maintaining support at the $104,000 level. The market also saw notable deleveraging following yesterday’s US Federal Reserve meeting.

That said, Bitcoin exchange activity is starting to show signs of fatigue, while retail investors continue to stay on the sidelines. At press time, BTC trades at $104,128, up 0.2% in the past 24 hours.