The Bitcoin Rainbow Chart Explained

The Bitcoin Rainbow Chart shows the bitcoin price on a logarithmic scale. Behind it lie nine coloured bands, from blue ("Basically a Fire Sale") to red ("Maximum Bubble Territory"). The bands follow a curve that flattens over time and are meant to tell you whether bitcoin is cheap or expensive right now. The catch: when the price fell below the lowest band in 2022, the chart was redrawn. A yardstick that is adjusted after it breaks measured little before.

What the Rainbow Chart shows

Open the Rainbow Chart and you see a black price line over a wide rainbow. Time runs to the right, price upwards, and logarithmically: each step on the axis is ten times the one below. Why that is the right way to show bitcoin is explained in the article on the log chart.

The rainbow consists of nine bands. They lie closely on top of each other and curve together: steep at the start, flatter and flatter later. Depending on which band the price line sits in, you read off what the picture "advises" you.

The slogans are deliberately flippant. They are labels, not a calculation: where "HODL!" ends and "Is this a bubble?" begins follows from no data point, only from how wide the person drawing it made the bands.

The curve behind it

The centre line is a logarithmic regression: the logarithm of the price is calculated against the logarithm of time. On the log chart such a curve flattens over time, because bitcoin grows by fewer percent each year. That is the same basic idea as the Bitcoin Power Law. The difference is not the shape but how the bands are laid around it and whether they stay fixed.

Where the Rainbow Chart comes from

The story is told on blockchaincenter.net, the site that still runs the chart (as of November 2026):

• 2014, Reddit: In the bear market after the collapse of Mt. Gox, the Reddit user "azop" posted pictures of his rainbow charts in the r/Bitcoin forum. The legend only had "Sell!", "Average" and "Buy!". His bands were straight lines on the log chart, so lasting exponential growth. He adjusted them several times to new prices.
• 2014, Bitcointalk: In the same bear market the Bitcointalk user "trolololo" published a logarithmic regression, a curve that flattens over time.
• 2019: The operator of blockchaincenter.net combined both ideas, azop's colours and trolololo's curve, gave the bands today's slogans and posted the first live version on Reddit on 19 May 2019.
• 2020: The chart became widely known when bitcoiners shared it on Twitter, among other things to mock the Stock-to-Flow model: if a joke chart describes the price just as well, that says little for the serious model.

The operator himself writes under the chart that it is not investment advice, has no scientific basis and is meant as a fun look at the price history. That is honest, and that is how you should read it.

2022: the price falls below the lowest band

Until 2021 the rainbow held. For almost eight years the price stayed inside the bands, with a brief exception in the Covid crash of March 2020. In the 2022 bear market bitcoin fell below 20’000 US dollars and with that below "Basically a Fire Sale".

The operator reacted in three steps:

1. September 2022: He left the formula as it was and added a tenth, violet band at the bottom ("Bitcoin is dead"). A few weeks later that did not hold either.
2. 21 November 2022: He published version 2 with a new formula, calculated with nine more years of data. He himself called the old formula too optimistic.
3. Later: a "Dynamic Rainbow Chart" that keeps recalculating a power-law regression over all daily prices since 2012.

On 21 November 2022, by the way, the daily close was 15’784 US dollars, the lowest close of that bear market.

Why redrawing is the weakness

A valuation model should tell you beforehand what is cheap. Until 2022 the Rainbow Chart said: below the blue band it does not get cheaper. Then it got cheaper. Instead of saying "the assumption was wrong", the picture was changed so that the price fits in again.

That has three consequences:

• Hindsight lies. Look at today's Rainbow Chart and you see the 2022 low comfortably inside a lower band. That the picture people had in front of them in 2022 failed exactly there is no longer visible.
• The bands measure the person drawing them, not the market. A curve fitted to all past prices almost always encloses those prices. That is no achievement, just arithmetic. The only interesting question is whether it encloses prices it did not know yet.
• A curve recalculated all the time follows the market. When prices fall, the curve falls with them. So the band moves lower exactly when you would need it as a fixed limit.

What this site's Power Law does differently

The Power Law is also a straight line on the log-log chart, with bands above and below it. Three differences make it a yardstick rather than a decoration:

1. The floor is fixed. It is 0.42 times the published Power Law formula 10^−16.493 × days^5.688. These numbers are not recalculated with new prices. A day's floor is the same today as a year ago and in ten years. The site's own regression only runs alongside as a check.

2. The bands come from history, not from the eye. The floor lies where the bear markets ended. The top band is calculated through the five cycle tops of 2011, 2013, 2017, 2021 and 2025. It is only refitted when a new all-time high stands for a year and so counts as a cycle top. Instead of nine colour bands there are five valuation zones in between, and they move closer together with every cycle because the tops have come closer to the floor.

3. Breaks are counted, not drawn away. The floor did not hold on every day either. Since July 2010, 218 of 5’957 days closed below it, 3.7 %. Most of them in 2010, 2012 and 2015. In 2022 it was 6 days, in 2023 4 days, in 2026 one. The formula stayed nonetheless, and the site states these days openly.

Where the zones are today and which one bitcoin is in right now is shown directly by the tool:

Being honest: the Power Law is a curve too

The Power Law is not a law of nature. Here too someone chose a shape, and the floor too was undercut briefly in 2022 and 2026. The advantage is not that it is never wrong. The advantage is that you can catch it being wrong: the formula is fixed, so you can check whether it holds. The site even names a date on which the model fails: if bitcoin is still below its October 2025 high on 2 December 2028, it is below the floor and the Power Law no longer describes it. Its weaknesses in detail are discussed in criticism of the Power Law.

How you can use the Rainbow Chart

As entertainment, and as a reminder that bitcoin follows a calm trend on the log chart, the Rainbow Chart works. For decisions, keep three things in mind:

• Ask which version. A screenshot without a date can show version 1, version 2 or the dynamic version. Their bands lie in different places.
• Don't take the colours literally. "BUY!" and "Sell. Seriously, SELL!" are the artist's jokes, not signals.
• Compare with a fixed yardstick. If the Rainbow Chart and the valuation zones say the same thing, that is a hint. If not, the fixed line is the one you can still check in a year.

For a savings plan you need no rainbow: buying regularly and not buying extra nervously in expensive zones is enough. The zones help you place lump sums and sales.