Bitcoin has become a hot topic in recent times, as the world’s first cryptocurrency continues to draw attention from investors, economists, and people all around the world. A new Bitcoin Rainbow chart model has been developed, which suggests that Bitcoin (BTC) is severely undervalued and is a much better investment than traditional currencies.
The Bitcoin Rainbow chart was developed by analyst Willy Woo and builds on his previous work with Network Value to Transactions (NVT) ratio models. The model considers different technical indicators such as mining cost per transaction, daily active addresses, and trading volume over time to create an intuitive visual representation of the value of BTC compared to traditional currency markets. The result is a ‘Rainbow’ chart that looks like it should be more friendly than it really is; its depiction indicates that BTC is currently valued at less than half of what it should be. Bitcoin, or BTC as it is often referred to, is one of the most popular cryptocurrencies in the world today. However, in recent weeks it has seen a sharp decline in its value. As of this writing, Bitcoin’s price has dropped more than 20 percent from its recent high of $13,868. This downturn has left many investors wondering why Bitcoin is going down and what caused it.
The primary cause for the fall in Bitcoin’s price appears to be linked to concerns about regulation and taxation on cryptocurrency investments. Several countries have proposed new laws that could limit access to cryptocurrencies such as Bitcoin and increase taxes on profits generated from trading them. This news has created uncertainty among investors who are uncertain how these regulations will impact their investments and whether they should continue investing in Bitcoin or not.
in addition, according to Glassnode data, the percentage of the bitcoin supply that was last active five or more years ago has now risen to a new record high of 27,772%, indicating that BTC is still being accumulated for long-term holding.
The chart is based on the notion that an asset’s price is directly inversely proportional to how scarce it is.
The stock-to-flow model states that the rate of new bitcoin produced is cut in half typically every four years, which directly affects the price of bitcoin. According to the present stock-to-flow ratio, bitcoin is currently undervalued and is anticipated to eventually achieve a new all-time high.
