What is the Bitcoin rainbow chart?

The Bitcoin rainbow chart is a long-term price valuation tool that overlays a series of color-coded bands on a logarithmic Bitcoin price chart. Each band — ranging from deep blue ("Fire Sale") through green, yellow, and orange to red ("Maximum Bubble") — represents a different valuation zone derived from a power-law regression model fit to Bitcoin's historical price data. The chart is used to provide long-term context for where the current price sits relative to historical price behavior, not to predict future movements.

How is the Bitcoin rainbow chart calculated?

The Liquid State Bitcoin rainbow chart fits a power-law regression model to Bitcoin's weekly closing price history, sourced from Binance 1W klines. The regression line represents a smoothed long-term price trend on a logarithmic scale. The seven color bands are evenly spaced above and below this regression line, calibrated so that historical price extremes (major cycle tops and bottoms) tend to coincide with the outermost bands. The current BTC price is then plotted against these bands to show which zone it occupies today.

What do the colors on the Bitcoin rainbow chart mean?

The seven color bands represent different valuation zones from historically undervalued to historically overvalued. From lowest to highest: "Fire Sale" (deep blue) — historically extreme undervaluation; "Buy!" (blue) — well below long-term trend; "Accumulate" (teal/green) — below trend; "Still Cheap" (green) — near the regression line; "HODL!" (yellow) — above trend; "Is This a Bubble?" (orange) — historically elevated; and "Maximum Bubble Territory" (red) — historically extreme overvaluation. These are descriptive labels based on where the price has historically appeared in these zones; they are not investment advice or predictions.

Is the Bitcoin rainbow chart accurate?

The Bitcoin rainbow chart is a heuristic tool, not a predictive model. It illustrates where the current price sits relative to Bitcoin's historical logarithmic growth trend, which has held across multiple market cycles. However, Bitcoin's price history is limited (approximately 15 years), the power-law model is unfalsifiable in advance, and past patterns do not guarantee future behavior. The chart is best used as one data point for long-term context alongside other on-chain and market structure indicators — not as a standalone signal for trading decisions.

LIQUID STATE · Tools

Bitcoin Rainbow Chart

Power-law regression on Binance weekly klines — 7 valuation bands from "Fire Sale" to "Maximum Bubble." Live chart, updated daily. For educational purposes only.

BTC is currently in the Fair Value zone at $77,269

Maximum Bubble

Sell Zone

FOMO Zone

Hold

Fair Value

Value Zone

Fire Sale

How Liquid State's Rainbow Chart Works

The chart applies a power-law regression (log-log linear fit) to Bitcoin's weekly closing prices since 2017, modeled from the Bitcoin genesis block (Jan 3, 2009). The regression line estimates Bitcoin's "fair value" based on its long-term adoption curve.

Seven valuation bands are drawn at fixed multipliers above and below the regression line — from 0.5× (deep value) to 4.0× (extreme overvaluation). The band BTC currently occupies gives a systematic, data-driven read on where prices sit relative to the long-term trend.

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For educational and informational purposes only. Not financial advice. Past performance is not indicative of future results. Bitcoin prices are highly volatile. Data sourced from Binance public API.

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