Bitcoin Breaks Below Rainbow Chart’s ‘Dead’ Zone as Analysts Debate Model’s Relevance

Bitcoin has fallen below the lowest band of the popular Bitcoin Rainbow Chart for only the second time in history, triggering a debate among crypto analysts over whether the asset is deeply undervalued or whether the long-running valuation model has simply become outdated.

The world’s largest cryptocurrency is trading near $62,500, down roughly 50% from its October 2025 all-time high of $126,000. This decline has pushed BTC below the floor of the modern nine-band Rainbow Chart and into the original model’s purple “Bitcoin Is Dead” zone, a level that historically signals extreme pessimism rather than a prediction about bitcoin’s actual future prospects.

The Rainbow Chart, developed by Reddit user Azop in 2014, uses a logarithmic growth curve to track bitcoin’s long-term price trend and places the asset into colored bands corresponding with different stages of market sentiment. The breach has sparked significant disagreement among industry experts about what the move means for both bitcoin and the model itself.

Some bitcoin holders view the current position as a major buying opportunity. CryptoRover drew comparisons on X Wednesday with the last time bitcoin traded in this zone in 2022, when BTC sat around $15,000 before eventually recovering. However, others argue the breach signals something more fundamental about how bitcoin has evolved as an asset class.

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Markus Levin, co-founder of XYO, told CoinDesk that the breach represents a structural shift in the model rather than a death knell for bitcoin. “I do not read this as bitcoin being dead, I read it as the Rainbow Chart being dead, and that is actually a bullish statement about how far the asset has matured,” Levin said.

The core disagreement centers on whether historical models remain useful in a market increasingly shaped by institutional investors and exchange-traded funds. Ryan Lee, Bitget’s chief analyst, argued that the Rainbow Chart remains a useful reference for visualizing long-term market cycles but should not be viewed as a predictive tool. “The chart is based on logarithmic regression and historical price behavior instead of fundamental, macroeconomic, or market structure variables that increasingly influence bitcoin today,” Lee said.

Emad Shahin, COO of Ethra, characterized the Rainbow Chart as more of a sentiment gauge than a forecasting instrument. “The Rainbow Chart is a fitted regression with a sense of humor, not a forecasting tool,” Shahin told CoinDesk. “These charts are useful as sentiment cartoons. They capture mood but the moment you treat them as predictive, they fail you at exactly the turning points you most wanted them to call.”

The divergence between bitcoin’s current price and the Rainbow Chart’s historical bands comes as other widely followed valuation models have also struggled. The Stock-to-Flow model, which links bitcoin’s price to its programmed supply reductions, projected significantly higher prices following the 2024 halving than bitcoin ultimately achieved. This follows a pattern seen in related coverage of market-moving events that challenge conventional models.

Mark Zalan, CEO of GoMining, emphasized that the “Bitcoin Is Dead” zone does not indicate permanent collapse. “Historically, it has often marked periods of extreme fear and undervaluation, which were later followed by recoveries,” Zalan said. He noted that the 2025 cycle showed bitcoin does not have to follow old patterns exactly, with ETFs, institutions and changing market structure altering the dynamics.

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Bitcoin is currently trading near its April 2024 halving price, a development that runs counter to expectations for the current four-year cycle. According to CoinGecko data, this positioning reflects how institutional participation has fundamentally reshaped price discovery mechanisms.

Levin argued that the chart confirms what cycle data has been showing, noting that exponential growth assumptions were calibrated to a retail-driven, illiquid asset rather than a $1.25 trillion market with ETF flows and institutional balance sheets setting marginal prices. “These bands are a regression fitted to violent four-year cycles, but that volatility may be draining out as institutional capital and ETF flows turn bitcoin into a steadier, more liquid asset,” he said.

Lee cautioned that weak sentiment does not necessarily mean further declines are inevitable. “Current positioning near the lower end of the Rainbow Chart suggests sentiment has weakened, but it does not necessarily imply that substantially lower lows are ahead,” Lee said. He noted that a move toward the low-$50,000 range cannot be ruled out if risk sentiment deteriorates further, but the chart itself offers limited insight into where a definitive market bottom may form.

Whether bitcoin rebounds back into the Rainbow Chart’s historical range or continues to trade outside it may ultimately determine whether the model remains a useful framework for investors or joins a growing list of crypto valuation models that no longer reflect current market behavior.