Bitcoin Rainbow Chart

How to read the Rainbow Chart

The Rainbow Chart overlays Bitcoin's price history on a logarithmic regression model fitted to long-term historical data. On a logarithmic scale, Bitcoin's growth has often followed a broad upward trend over time. The coloured bands represent valuation zones around that trend line, helping show whether price is trading below, near, or above its long-term historical range.

• Bottom bands — Deep Discount — When price moves into the lower bands, Bitcoin is trading significantly below the model's long-term trend. Historically, these zones have often appeared during bear-market or early-recovery conditions. They can indicate a more attractive long-term accumulation environment, especially when supported by other indicators.
• Middle bands — Fair Value — Price is closer to the model's long-term trend. There is no clear extreme signal in either direction, so long-term investors often use these zones for steady DCA without urgency.
• Top bands — High Risk — Price is trading well above the model's long-term trend. Historically, these zones have often appeared during overheated bull-market conditions. Price can continue higher, but long-term investors often become more cautious with large new allocations and may use this area to review risk or gradually reduce exposure.

The dashed future extension shows where the model's bands continue over time if the historical logarithmic trend remains relevant. It is not a price forecast and should not be treated as a prediction of where Bitcoin will trade.

Important limitation: The Rainbow Chart is a simplified valuation model. Bitcoin can trade above or below the bands, and the long-term trend itself may become less reliable as the market matures. Use it as one piece of context, not as a standalone signal.

For a different view of Bitcoin's long-term cycle position, compare it with the 200-Week Moving Average.