On December 11, 2025, Bitcoin dipped below $90,000 as AI-related concerns rippled through risk markets, dragging the broader crypto space down 2.8% in a single session. For traders staring at candlestick charts and wondering where price goes next, the Bitcoin Rainbow Chart offers a radically different lens — one that filters out daily noise and reveals the long-term logarithmic trajectory that has governed Bitcoin pricing since 2012. This tutorial walks through the mathematical foundations, practical application, and advanced integration techniques for the Rainbow Chart framework.
The Objective
The Bitcoin Rainbow Chart is a logarithmic regression overlay that divides Bitcoin price history into nine color-coded bands, each representing a distinct market sentiment zone. The objective is not short-term price prediction. Instead, the chart provides a macro-level framework for identifying whether Bitcoin is historically undervalued, fairly valued, or overheated relative to its long-term growth curve.
Created in 2014 by a Reddit user known as “azop,” the chart was significantly refined in 2019 by a contributor called “Rohmeo,” who recalibrated the regression parameters to produce what is now known as Rainbow Chart V2. The V2 model introduced the distinctive logarithmic “bow” shape and updated the formula to account for Bitcoin maturation beyond its early speculative phase.
Understanding this tool requires familiarity with logarithmic regression, market cycle theory, and the discipline to use the chart as one input among many — never as a standalone signal.
Prerequisites
Before working with the Rainbow Chart at an advanced level, you need several foundational concepts in place.
Logarithmic scale literacy. The Rainbow Chart plots price on a log scale, where equal vertical distances represent equal percentage changes rather than equal dollar changes. This is critical because Bitcoin has moved from $0.01 to over $126,000 in its lifetime — a linear scale would compress all early price action into an invisible flatline. Understanding log scale is non-negotiable for interpreting the chart correctly.
Regression fundamentals. The colored bands are derived from logarithmic regression curves fitted to Bitcoin historical price data. The regression line represents the “fair value” trend, and the bands represent standard deviations above and below that line. Wider bands at higher prices reflect Bitcoin increased volatility at higher market capitalizations.
Market cycle awareness. Bitcoin historically moves in four-year cycles tied to its halving schedule. The Rainbow Chart overlays these cycles, allowing you to compare current positioning against analogous phases in 2013, 2017, and 2021. Each cycle tends to touch the upper red bands at the peak and the lower blue bands at the trough.
Tool access. The chart is available for free at BlockchainCenter.net and can also be overlaid on TradingView using community-published indicators. Both platforms allow you to zoom, annotate, and export data.
Step-by-Step Walkthrough
Step 1: Locate the current price band. As of December 11, 2025, with Bitcoin trading around $90,000 (after dipping from $92,511 earlier in the day), the Rainbow Chart placed Bitcoin in the yellow-to-light-green transition zone. This zone is labeled “HODL!” on the lower boundary and “Still Cheap” on the upper boundary. In historical context, this placement suggests Bitcoin is near its long-term fair value — neither dramatically overbought nor oversold.
Step 2: Compare against previous cycle positioning. At the same point in the 2021 cycle (roughly 18 months after the 2020 halving), Bitcoin was in the orange “Is this a bubble?” band, trading significantly above its regression line. The current placement is notably lower relative to the regression, suggesting the 2025 cycle has been less exuberant — or that the regression curve has steepened to account for structural changes in Bitcoin market dynamics.
Step 3: Calculate the deviation from the regression midpoint. For quantitative traders, the raw deviation from the central regression line provides a continuous metric rather than a discrete band label. You can extract the regression formula — typically expressed as log(price) = a + b * log(days_since_genesis) — and compute the current residual. A positive residual indicates overvaluation relative to trend; a negative residual indicates undervaluation. On December 11, Bitcoin residual was approximately neutral, consistent with the yellow band placement.
Step 4: Integrate with on-chain metrics. The Rainbow Chart becomes significantly more powerful when combined with on-chain data. In December 2025, long-term holders were distributing at 26,000 BTC per day, and $350 million exited Bitcoin ETFs in mid-December. These outflows, combined with the Rainbow Chart showing mid-range positioning, suggested the market was in a distribution phase — long-term participants were de-risking while the price remained near historical highs.
Contrast this with a scenario where the price is in the blue “Fire Sale” band AND on-chain metrics show accumulation. That confluence would represent a much stronger buy signal than either indicator alone.
Step 5: Map to the halving cycle. Bitcoin 2024 halving reduced the block subsidy from 6.25 to 3.125 BTC. Historically, the 12-18 months following a halving see the most dramatic price appreciation. By December 2025, Bitcoin was approximately 18 months post-halving — typically the late-cycle phase where the Rainbow Chart shifts from green and yellow bands toward orange and red. The fact that it remained in the yellow zone suggested this cycle might be more muted than previous ones, potentially due to the maturation of institutional markets and ETF-driven price discovery.
Step 6: Build a rules-based framework. Advanced practitioners formalize their Rainbow Chart usage into actionable rules. A sample framework: allocate 60% of target position size when price enters the green “Accumulate” band, 30% in the cyan “BUY!” band, and 10% in the dark blue “Fire Sale” band. For exits: reduce 30% of position in orange, 50% in light red, and 100% in dark red. Adjust percentages based on your risk tolerance and investment horizon.
Troubleshooting
The chart says “BUY” but the market is crashing. The Rainbow Chart is a long-term tool. During the March 2020 COVID crash, Bitcoin briefly entered the blue band and then dropped another 20% before bottoming. The chart identifies zones of historical value — it does not guarantee a floor. Always size positions to withstand additional downside.
Bands seem to be getting wider. This is by design. The V2 model uses logarithmic bands that expand as Bitcoin price increases, reflecting the reality that absolute volatility increases with price even as percentage volatility decreases. A $10,000 move at $90,000 Bitcoin is 11%; the same dollar move at $1,000 Bitcoin would be 1,000%.
The chart has not been recalibrated since 2019. Some analysts argue that the V2 regression parameters should be updated to reflect post-2021 market structure changes — particularly the introduction of spot Bitcoin ETFs, which fundamentally altered price discovery. This is a valid critique. Consider using the Rainbow Chart as a directional guide rather than a precise valuation model.
Different websites show slightly different charts. Implementation details vary across platforms. BlockchainCenter uses one set of regression parameters; TradingView community scripts may use others. For consistency, pick one source and stick with it. The directional signals — which band the price falls within — should be consistent across implementations.
Mastering the Skill
True mastery of the Bitcoin Rainbow Chart comes from combining it with a suite of complementary indicators. Pair it with the Puell Multiple, which measures miner revenue relative to its yearly moving average, to identify macro tops and bottoms. Combine it with the Stock-to-Flow model for a supply-driven perspective on fair value. Overlay it with the 200-week moving average, which has historically served as a reliable long-term support level.
On December 11, 2025, with Bitcoin at $90,000 after a 30% decline from its $126,000 peak, the Rainbow Chart placed it in the neutral yellow zone while on-chain data showed distribution pressure and ETF outflows. The advanced interpretation is not “buy” or “sell” — it is “the market is in a transitional phase where conviction is low and direction is uncertain.” That uncertainty is itself valuable information.
Document your Rainbow Chart readings weekly. Over time, you will develop an intuitive sense for where Bitcoin sits in its cycle and how the bands relate to your other signals. This systematic journaling is what separates technicians who react emotionally from those who execute with discipline.
Finally, remember that the Rainbow Chart is a heuristic, not a law. It captures a historical pattern that may or may not persist. Use it as one input in a multi-factor decision framework, and always have a risk management plan that accounts for the possibility that the pattern breaks.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Technical analysis tools are inherently limited and should not be the sole basis for investment decisions. Always conduct your own research and consult with a qualified financial advisor.
people forget the rainbow chart is literally a log regression with colored bands. its descriptive not predictive. works great until the regime changes and then it doesnt
exactly right. the rainbow chart is a temperature gauge not a timing tool. combine it with on chain metrics and macro context and it becomes genuinely useful for position sizing
The Rainbow Chart is such a classic tool for long-term holders. I love how this guide breaks down the upper bands versus the accumulation zones. It really helps put the volatility into perspective when everyone else is panicking during the dips.
Rohmeo recalibrating the regression in 2019 to account for BTC maturation was crucial. V1 was getting badly overstretched by the 2017 spike
V2 still stretched after 2021 though. at some point log regression breaks down as BTC matures and volatility compresses naturally. the chart is a rough guide not gospel
Rohmeo V2 recalibration in 2019 saved the chart from becoming useless after 2017 stretched everything. but even V2 starts looking stretched above $100K. we might need a V3 soon
Good breakdown, but I always tell people to take the Rainbow Chart with a grain of salt. It’s a logarithmic regression model, not a crystal ball. It’s great for sentiment, but make sure you’re looking at other indicators like RSI and volume before making any major moves.
Marcus makes a good point about RSI and volume. the rainbow chart tells you where you are historically but not when momentum shifts. use it as context not conviction