Bitcoin Rainbow Chart

The Bitcoin Rainbow Chart is a logarithmic Bitcoin price chart that includes color bands following a logarithmic regression. According to the BTC rainbow chart, Bitcoin is currently in "" territory, suggesting that it's a good time to sell. Additionally, you can check our Bitcoin price prediction for more information on Bitcoin forecast.

The different colors of the bands are an indication of whether Bitcoin is currently undervalued or overvalued. A Bitcoin log chart is used instead of a linear chart in order to better visualize Bitcoin's long-term growth trajectory. The colder colors indicate a good buying opportunity, while the hotter colors indicate a good selling opportunity.

1. Dark Red: The Bitcoin market is extremely overextended, BTC price is likely to drop
2. Red: Bitcoin is overbought, traders should consider taking profits
3. Dark Orange: Buyers are dominating the market, FOMO (fear of missing out) is building up
4. Light Orange: Balanced market
5. Yellow: Investors should hold their Bitcoin
6. Light Green: Bitcoin can be acquired for relatively cheap
7. Green: A good spot for accumulating a Bitcoin position
8. Light Blue: A very good BTC buying opportunity
9. Blue: Bitcoin is highly undervalued

The Bitcoin protocol has a built-in mechanism where the reward for successfully adding a block to the Bitcoin blockchain is reduced by half after every 210,000 blocks are mined, which happens approximately every four years. This is commonly referred to as the Bitcoin halving, and is seen as a very important event for the Bitcoin market.

When the block reward gets halved, miners start receiving less Bitcoin as compensation for securing the network, which means that the supply of new BTC coming onto the market slows down significantly.

So far, there have been three Bitcoin halvings:

• First Bitcoin halving: November 28, 2012 (50 BTC to 25 BTC)
• Second Bitcoin halving: July 9, 2016 (25 BTC to 12.5 BTC)
• Third Bitcoin halving: May 11, 2020 (12.5 BTC to 6.25 BTC)
• Fourth Bitcoin halving: April 19, 2024 (6.25 BTC to 3.125 BTC)

You can see the Bitcoin halving dates marked on the Bitcoin Rainbow Chart. The Bitcoin price has historically been in the lower bands when each halving happened, and then proceeded to climb towards the upper bands within the 4-year halving cycle. However, it's worth noting that there is only a small sample size, and it's possible that this trend will not continue into the future.

The logarithmic regression idea used by the Bitcoin Rainbow Chart was introduced in 2014 by a user called "Trolololo" on the popular forum Bitcoin Talk. A few Bitcoin community members worked on the idea, which eventually became the Rainbow Chart as we know it today.