Bitcoin Rainbow Chart

The Bitcoin Rainbow Chart is one of the most commonly used indicators for long-term investors. The color bands, placed on a logarithmic scale, visualize Bitcoin’s historical price movements and provide clues about market cycles. Each band represents a different stage of investor psychology, allowing a clearer understanding of where the price stands based on past data.

The upper bands on the chart are shown in red and orange. These areas historically correspond to levels where Bitcoin is considered overvalued and where intense profit-taking occurs. These stages, called “Maximum Bubble” and “Serious Sell-Off,” indicate periods when investors should be cautious. Slightly lower, the yellow and orange tones generally correspond to stages such as “FOMO Increasing” or “Is This a Bubble?”; these reflect conditions where new participants enter the market rapidly, but prices start inflating speculatively.

The mid-level yellow and green tones represent a more balanced market structure. Bands labeled “Hold” and “Still Cheap” are considered reasonable zones where investors might maintain their current positions or gradually accumulate more. The lowest bands, in blue and navy, represent stages called “Accumulate”, “Buy”, and sometimes “Deep Discount (Fire Sale).” These periods correspond to times when the market experiences the most fear, yet historically offer the most attractive buying opportunities for long-term investors.

The Rainbow Chart presented on this page not only reflects past price movements but can also be used to interpret the current market sentiment. When Bitcoin approaches the upper bands, excessive optimism and bubble risks rise, whereas levels near the lower bands signal long-term accumulation and buying opportunities. Of course, this indicator alone does not provide definitive buy or sell signals, but when considered alongside other metrics, it serves as a powerful guide for understanding market valuation levels.