CryptoWeeklies / Glossary
What is a rainbow chart?
A rainbow chart takes a long-run trend line and draws coloured bands above and below it. Where price sits among the bands gives the market a label — accumulation at the bottom, euphoria at the top.
How these bands are built
The pages here fit a polynomial through log price to get a fair value baseline, then draw envelopes at one, two and three standard deviations of the residual — how far price has typically strayed from that fit. The result is a valuation map running from deep accumulation through to euphoria.
The phase label on each page is simply which band today's price falls in:
- Max Despair (−3σ) — as far below trend as it has been.
- Bear Market / Accumulation — below trend.
- Fair Value — on the fitted line.
- Bull Market — above trend.
- Euphoria (+3σ) — as far above trend as it has been.
The catch every rainbow chart shares
The bands are fitted to history, so they are redrawn as history grows — a chart that looked accurate in one cycle can be refitted into a different shape after the next. A polynomial fit also has no mechanism behind it; nothing forces price to respect a curve that was drawn to match past price.
Read the phase label as a description of where price sits versus its own past, not as a forecast. For a forecast with actual confidence intervals, see the forecast pages.