The Rainbow Price Chart & V/T Ratio Signals is a powerful technical and on-chain analysis tool designed specifically for Bitcoin investors. By combining visual price zones with blockchain-derived sentiment metrics, this indicator offers a comprehensive view of market cycles, helping traders and long-term holders identify strategic entry and exit opportunities.
Whether you're a seasoned crypto analyst or a new investor navigating Bitcoin's volatile landscape, this indicator simplifies complex data into actionable insights—directly on your price chart.
Understanding the Rainbow Price Chart
At the core of this indicator lies the Rainbow Price Chart, a well-known visualization model that segments Bitcoin’s price action into distinct emotional and cyclical zones. These zones are represented as color-coded bands that overlay the price chart, offering real-time context about market sentiment.
How It Works
The Rainbow bands are calculated using an Exponential Moving Average (EMA)—typically set to 200 periods by default. Each band represents a multiple of this EMA, forming ascending and descending thresholds that define different market phases:
- Fire Sale Zone (Deep Red): Extreme undervaluation; often seen during bear market bottoms.
- Buy Zone (Orange): Attractive valuation; ideal for accumulation.
- Accumulation Zone (Yellow): Early recovery phase; smart money may be building positions.
- HODL Zone (Green): Healthy growth; time to hold and avoid emotional selling.
- FOMO Zone (Light Blue): Heightened speculation; retail investors entering en masse.
- Bubble Zone (Dark Blue/Purple): Overvaluation territory; high risk of correction.
These transparent overlays make it easy to assess where Bitcoin currently stands in its market cycle at a glance.
🔍 Pro Tip: For accurate interpretation, always view the Rainbow Price Chart on a logarithmic scale. The indicator includes a visual reminder to enable this setting, ensuring proper alignment of exponential price growth with the bands.
Integrating On-Chain Insights: The V/T Ratio Signal
While price-based models offer valuable context, they lack fundamental backing. That’s where the Value per Transaction (V/T) Ratio comes in—a unique on-chain metric that adds depth to the analysis.
What Is the V/T Ratio?
The V/T Ratio measures the average value transferred per Bitcoin transaction. It’s calculated as:
V/T Ratio = Total Transacted Value (USD) / Number of TransactionsThis ratio is then smoothed using a 7-period Exponential Moving Average and analyzed within a dynamic Linear Regression Channel (LRC) based on standard deviation levels.
Signal Interpretation
Based on the position of the smoothed V/T Ratio within the LRC, the indicator generates clear signals directly on the chart:
- "BOTTOM": Indicates low price levels combined with low transaction values—often signaling accumulation phases.
- "SEMI-LOW" / "SEMI-HIGH": Represents transitional stages within the channel, useful for identifying momentum shifts.
- "ATH" (All-Time High): Suggests potentially overvalued conditions when both price and transaction value peak.
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These signals act as early warnings or confirmations for major turning points in the market cycle, especially when aligned with Rainbow zone transitions.
Data Sources and Technical Setup
To function accurately, the indicator pulls daily on-chain data from external sources integrated into TradingView—specifically:
- Total Transacted Value (TVTVR)
- Number of Transactions (NTRAN)
This data is sourced via QUANDL:BCHAIN, ensuring reliable and verifiable inputs. While the raw data appears in diagnostic panes for transparency, advanced users can optionally enable plotting of the V/T Ratio line and LRC channel for deeper analysis.
Recommended Settings
- Timeframe: Best used on daily charts for long-term accuracy.
- Chart Type: Use logarithmic scale for correct band alignment.
- Customization: Users can adjust EMA length, LRC deviation levels, and signal sensitivity in the script settings.
Who Should Use This Indicator?
This tool is ideal for:
- Long-term Bitcoin investors (HODLers) seeking data-driven confirmation before buying or selling.
- Technical traders who want to combine chart patterns with on-chain fundamentals.
- Market cycle analysts studying macro trends in crypto valuation.
By merging psychological price zones with real blockchain activity, it bridges the gap between emotion-driven price action and fundamental value.
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Frequently Asked Questions (FAQ)
Q: Can I use this indicator on timeframes other than daily?
While the indicator works on all timeframes, it is optimized for daily charts. Lower timeframes may produce misleading signals due to noise in on-chain data and shorter-term volatility.
Q: Why does the Rainbow Chart need a logarithmic scale?
Bitcoin’s price grows exponentially over time. A logarithmic scale ensures that percentage changes are visually consistent across cycles, preventing distortion of the Rainbow bands—especially critical during bull runs.
Q: Is the V/T Ratio available for other cryptocurrencies?
Currently, this indicator is built exclusively for Bitcoin, as it relies on mature, reliable on-chain data. Other assets may lack sufficient historical depth or consistency in transaction reporting.
Q: Does this indicator give buy/sell alerts?
No automated alerts are built-in, but visual signals like "BOTTOM" or "ATH" appear directly on the chart. Traders can manually set alerts based on these conditions or integrate custom logic in Pine Script.
Q: Is the source code really open?
Yes. In line with TradingView’s open-source philosophy, the script is fully accessible for review, modification, and verification—though redistribution must comply with their House Rules.
Final Thoughts: A Holistic View of Bitcoin Valuation
The Rainbow Price Chart & V/T Ratio Signals stands out as a rare fusion of aesthetic clarity and analytical rigor. It doesn’t just tell you what price is doing—it helps explain why, using both historical patterns and real economic activity on the blockchain.
For investors tired of hype-driven decisions, this tool offers a grounded framework rooted in data. When the Fire Sale Zone lights up while the V/T Ratio hits “BOTTOM,” that’s not just a signal—it’s a story told by the network itself.
Whether you're preparing for the next bull run or safeguarding profits at ATH levels, having layered insights gives you an edge.
👉 Start applying on-chain metrics to your strategy today—analyze Bitcoin like a pro.
Note: This indicator does not constitute financial advice. Always conduct your own research and consider risk management before making investment decisions.