The BTC Rainbow Chart is a long-term valuation tool designed to help traders and investors understand Bitcoin’s price movements over time. Unlike traditional price charts, it uses a logarithmic regression model with color bands to indicate whether Bitcoin is undervalued, overvalued, or trading within a fair price range. The colors range from deep blue (indicating "Fire Sale" or extreme undervaluation) to dark red (signaling "Maximum Bubble Territory" or extreme overvaluation).

By providing a visual representation of price trends, the BTC Rainbow Chart offers a simple yet effective way to assess market sentiment. It does not guarantee price predictions but serves as a historical reference to identify patterns in Bitcoin’s price cycle. Many investors use it to time their market entries and exits based on past performance. To understand more about how this tool works and its historical significance, you can explore the detailed insights provided in the BTC Rainbow guide.