Legendary 10-Year Indicator Hits “Bitcoin Is Dead” Level After Latest Drop: But Its Meaning Could Be Very Different

Bitcoin has fallen below the lowest band on the Bitcoin Rainbow Chart model, used to track long-term price trends, entering the purple zone labeled “Bitcoin is dead.” This level, in the original version of the model, historically only indicates periods of extreme panic and worthlessness that have occurred very rarely.

Developed in 2014 by Reddit user Azop, the Bitcoin Rainbow Chart tracks Bitcoin’s long-term price movement using a logarithmic growth curve. Different colored regions in the model represent different phases of market sentiment. Bitcoin falling below the lowest band is considered a remarkable development, occurring only twice in the model’s history.

Some Bitcoin observers interpret this price drop to this region as a significant bullish signal. Those who hold this view point to Bitcoin forming a cyclical bottom in 2022 after falling to around $15,000, and then undergoing a strong recovery.

However, analysts have differing opinions on the meaning of this signal. Markus Levin, co-founder of XYO, stated that Bitcoin’s price falling below a range that has been valid for more than 10 years indicates a structural change in the model. According to Levin, this doesn’t mean Bitcoin is “dead”; rather, it shows that the Rainbow Chart model has lost its validity.

Ethra COO Emad Shahin also stated that the Rainbow Chart should be seen more as an indicator of sentiment than a forecasting tool. GoMining CEO Mark Zalan said that the “Bitcoin is dead” zone doesn’t mean Bitcoin is truly over; historically, this zone has often corresponded to periods of extreme panic and low valuation. According to Zalan, corrections and recovery tend to be seen in the market after such periods.

However, the increasing role of institutional investors, spot ETF flows, derivatives market activity, and macroeconomic developments in Bitcoin pricing reduces the effectiveness of analyses based solely on historical valuation models.

Bitget’s chief analyst, Ryan Lee, stated that Bitcoin’s position in the lower region of the Rainbow Chart indicates weakening market sentiment, but this doesn’t necessarily mean a new and sharp low is imminent. According to Lee, a further decline in risk appetite could lead to Bitcoin falling towards the $50,000 range, a possibility that cannot be entirely ruled out.

*This is not investment advice.