What is the Bitcoin rainbow chart?

The Bitcoin Rainbow Chart is one of the most recognizable long-term trend analysis tools in the cryptocurrency space. It transforms the price fluctuations of Bitcoin since its inception into an intuitive valuation map through colorful bands.

When the price sinks into the deep blue area at the bottom, the market is filled with panic and sell-offs; when the price leaps into the deep red area at the top, greed and bubbles emerge. The chart, born from a community joke, has now become an alternative compass for crypto investors navigating through bull and bear cycles.

##The Mystery of Origins: From Joke to Professional Tool Transformation

The birth of Bitcoin's rainbow chart was quite dramatic. In 2014, Reddit user "azop" satirized the violent fluctuations in the price of Bitcoin by superimposing a rainbow ribbon on a logarithmic price chart, jokingly saying that "the price of Bitcoin is as unpredictable as a rainbow".

This tool, originally called the "meme chart," unexpectedly gained vitality in community dissemination.

The real turning point occurred in 2019. Developer Rohmeo launched the V2 version of the rainbow chart on the BlockchainCenter website, introducing logarithmic regression models and curved color bands, significantly enhancing the scientific nature and visualization effects of the data.

The new version is inspired by the idea of logarithmic regression proposed by BitcoinTalk forum user "trolololo" in 2014. From caricature to professional tools, the rainbow chart completes its gorgeous turn.

Ribbon Language: Seven Colors Interpreting Market Sentiment Codes

The core value of the rainbow chart lies in dividing the valuation range of Bitcoin using colors, with each color corresponding to clear market sentiment and operational suggestions:

• Deep blue band ("basically a fire sale"): severely underestimated, historic bottom-fishing opportunity
• Cyan Band ("Buy Now!"): Clearly undervalued, strong buy signal
• Green Zone ("Accumulate"): Value range, suitable for gradually building a position
• Light Green Band ("Still Very Cheap"): Mildly Undervalued, Selective Accumulation
• Yellow Band ("Hold Long Term!"): Reasonable valuation, maintain positions and wait.
• Orange Band ("Is this a bubble?"): Valuation is high, be wary of pullback risks
• Red Band ("Sell Quickly!"): Significantly Overvalued, Consider Taking Profits

These ribbons are based on logarithmic regression calculations, effectively filtering out the "noise" of short-term price fluctuations and highlighting the long-term value trajectory of Bitcoin.

##Practical Guide: Four Steps to Unlock the Investment Value of Rainbow Charts

Locate current price range

Visit data platforms like BlockchainCenter, focus on the far right of the chart, and confirm the specific color band position of the Bitcoin price. As of June 2025, after breaking through 100,000 USD, the Bitcoin price is located in the transition area between orange and red.

combined historical performance analysis

Looking back at Bitcoin's historical performance within the same color bands. For example, at the end of 2018, the price fell into the deep blue band (around $3000 - $4000), which then initiated a two-year bull market; while in 2021, when it reached the deep red band ($64000), a significant correction occurred.

Multiple Indicator Cross Verification

A single tool can easily lead to misconceptions; it is necessary to combine it with other indicators to strengthen judgment:

• Volume changes: Unusual spikes in volume may indicate a trend reversal
• Technical indicators: RSI overbought/oversold, MACD trend divergence provide technical support.
• Macroeconomic Environment: Interest Rate Policies and Inflation Data Affect Capital Flows

formulate investment strategy

• Dark blue to light green range: Start dollar-cost averaging or increase investment proportion
• Yellow band: Maintain positions, avoid chasing up and selling down.
• Orange-red band: Take profit in batches to control position risk

##The Duality of Controversy: The Coexistence of Advantages and Limitations of the Rainbow Chart

Core Advantages

• Visually intuitive: Complex valuations can be read in one second, very beginner-friendly.
• Historical Anchoring: Based on years of data accumulation, verifying long-term patterns
• Emotion Quantification: Transforming market psychology into actionable color band boundaries

is an undeniable limitation

• Lag: Relies on historical data, making it difficult to timely reflect sudden black swan events.
• Parameter subjectivity: The ribbon width and color threshold depend on manual settings, leaving room for optimization.
• Short-term invalidation: In extreme market conditions, there may be instances where prices briefly break through the boundaries of the color bands (for example, the V1 version was forced to add a purple band to respond to price crashes)

##Dialogue between the 2025 Market and the Rainbow Chart

The Bitcoin market in 2025 presents three major characteristics, providing a new interpretative dimension to the rainbow chart:

Valuation challenges after the price of ### reaches a new high Bitcoin will break through 100,000 USD by the end of 2024, and will fluctuate between 100,000 and 110,000 USD in June 2025. According to the rainbow chart standard, the price is in the "orange-red" transition zone, indicating a high valuation and the risk of a pullback.

The underlying logic of exacerbated scarcity

After the fourth halving, Bitcoin's daily production will drop to 450 coins, and the next halving (in 2028) will further reduce it to 225 coins per day. The increasing scarcity may reshape the valuation central axis of the future rainbow chart.

potential risks of centralized mining

Currently, the six major mining pools control over 95% of block production, with Foundry and AntPool accounting for more than 50% combined. The concentration of computing power may impact the decentralized characteristics of the network, becoming an important variable that has not been quantified in the rainbow chart.

Institutional investors have quietly added the Bitcoin rainbow chart to their dashboards, while retail investors swipe through this vibrant curve on their mobile screens. From deep blue despair to deep red euphoria, the value of the rainbow chart lies not only in its predictive power but also in providing a visual language for market sentiment.

When Bitcoin hovers around $110,000 in 2025, the flashing warning of the orange band reminds investors: the future of the crypto market still follows the ancient laws of scarcity and crowd psychology.

Author: Blog Team *This content does not constitute any offer, solicitation, or advice. You should always seek independent professional advice before making any investment decisions. *Please note that Gate may restrict or prohibit all or part of its services from restricted areas. Please read the user agreement for more information, link: