Bitcoin rainbow chart
Stock investors like to judge whether a stock is dear or cheap with channels and moving averages. Bitcoin has no earnings report, but over more than a decade its price has traced a remarkably steady long-term path. The rainbow chart draws that path as a logarithmic-regression band — from the deep-blue "Fire Sale" zone to the red "bubble" — so you can see which band today's price sits in.
Once you see the long-term position, DCA beats chasing for beginners
The plainest use of the rainbow chart is the reminder to not panic in a cold band and not get carried away in a hot one. Rather than betting on a single point, a fixed-amount DCA smooths out that swing. Open an account and start your first buy — sign up to Binance with our invite code and shave your fees too.
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What the rainbow chart is actually drawing
Plot Bitcoin's price history on a logarithmic scale (where each step up the axis is ten times, not a fixed addition) and you'll find it roughly follows a straight line upward. The rainbow chart wraps a set of parallel coloured bands around that regression line: the middle is the regression midline, and going up gets ever "dearer" (green → yellow → orange → red, up to bubble), while going down gets ever "cheaper" (light blue → deep blue, down to the Fire Sale zone). The midline formula this page uses is the one common in the field: with the days d since the genesis date, 3 January 2009, price = 10^(2.9065 × ln(d) − 19.493), then shifted up and down in log space to draw nine bands.
Why is it useful for a stock investor? Because it turns "dear or cheap" from an absolute price into a position relative to the long-term path — just as you wouldn't look at a share price alone, but at where it sits in its channel. But hold three things firmly in mind: one, this is a fit after the fact, looking back at history with today's data, so it's flattering by nature; two, the coefficients in the formula are chosen by hand, and another set gives another chart; three, the model assumes the past growth pattern continues, which nobody can guarantee. It's good for cooling the mood, not for calling bottoms and tops. Pair it with the Fear & Greed Index for sentiment and the position calculator for risk, and it's a steadier combination. For further reading, see dollar-cost averaging into Bitcoin.
We ran this formula for the current number of days and found a point that easily misleads beginners: in much later years the regression midline gets pushed quite high, so the real price sitting several bands below the midline is normal for this kind of model — it does not mean "severely undervalued, buy with your eyes closed". We only treat it as a rough sense of position: a little more patience in the deep- and light-blue bands, a little more caution in the orange and red — that's all, never as a buy/sell signal.