Bitcoin rainbow chart’s undervaluation signal vs supply overhang – Which one wins?

ambcryptoPublished on 2026-03-10Last updated on 2026-03-10

Abstract

Bitcoin has reclaimed the $70k level, yet remains significantly below the miner cost range of $89k-$91k. On-chain metrics, such as the Inter-exchange Flow Pulse, show a bullish crossover, suggesting potential accumulation. However, the Bitcoin Rainbow Chart indicates that BTC is in an extremely undervalued, or "Bitcoin is dead," zone. Analysis of holder behavior reveals short-term holders are realizing losses, with 140k BTC leaving this cohort, indicating possible capitulation. The substantial 21.3% gap between the market price and the realized price of $89k creates a supply overhang. This suggests short-term holders may sell into any price rallies to break even. The LTH/STH SOPR ratio of 0.89, far from the lows seen at previous bear market bottoms, indicates that calling a structural low may be premature. In summary, while the Rainbow Chart signals undervaluation, on-chain data points to significant selling pressure up to $89k.

Bitcoin [BTC], at the time of writing, had creeped back above the key $70k resistance. It found a surge in demand around the $65k-zone over the weekend, despite the gloomy news across the wider market. However, despite the price bounce, Bitcoin is still trading a significant distance from the miner costs of $89k-$91k.

AMBCrypto previously reported that exchange flow dynamics revealed a bullish sign for the prices. The Inter-exchange flow pulse metric saw a bullish crossover, a development that has historically indicated early-cycle accumulation phases.

Could this be the start of the next powerful Bitcoin rally?

“Bitcoin is dead,” says Rainbow Chart

The Bitcoin Rainbow Chart is a long-term, logarithmic chart that maps out whether Bitcoin is overvalued or undervalued in the long-term. Some investors keep an eye on this chart to see if cyclical tops and bottoms are in.

At press time, BTC was trading in an extremely undervalued area. The purple region marked on the chart showed it was so cheap that it was considered the “Bitcoin is dead” zone.

Nowhere to go but up?

According to crypto analyst Axel Adler Jr’s observations, short-term holders have continued to realize losses. The STH supply fell from 6.06 million BTC to 5.92 million, meaning 140k left the cohort.

This could be due to capitulation. Held coins maturing (their ages crossed the 155-day STH threshold) also explained the STH supply drop.

The realized price, or the average cost-basis of all BTC in circulation, was at $89k. The market price was at $70k – A 21.3% gap. The analyst argued that such a gap has created a supply overhang for Bitcoin. Short-term holders at a loss would want to use rallies to sell their BTC without realizing a loss.

Finally, the LTH/STH SOPR metric showed that short-term holders were selling at a loss. Meanwhile, LTHs were not selling, but neither were they able to absorb the supply. The SOPR ratio was at 0.89.

At the 2018 and 2022 bear market bottoms, the metric had fallen to 0.48 and 0.50, respectively.

Therefore, calling a structural low here might be premature.

Final Summary

  • Bitcoin’s Rainbow Chart showed that BTC was at extremely undervalued price levels.
  • On-chain metrics hinted at a sizeable supply overhang all the way to $89k, and the current bounce may not be enough to call for a long-term low.

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Related Questions

QWhat does the Bitcoin Rainbow Chart currently indicate about BTC's valuation?

AThe Bitcoin Rainbow Chart indicates that BTC is currently trading in an extremely undervalued area, specifically in the 'Bitcoin is dead' zone.

QWhat key price level did Bitcoin manage to climb back above at the time of writing?

ABitcoin had climbed back above the key $70k resistance level at the time of writing.

QAccording to the analyst, what has the gap between the realized price and the market price created for Bitcoin?

AThe 21.3% gap between the realized price ($89k) and the market price ($70k) has created a supply overhang for Bitcoin.

QWhat did the Inter-exchange Flow Pulse metric show, as previously mentioned in the article?

AThe Inter-exchange Flow Pulse metric saw a bullish crossover, which has historically indicated early-cycle accumulation phases.

QWhy might calling a structural low for Bitcoin be premature, based on the LTH/STH SOPR metric?

ACalling a structural low might be premature because the LTH/STH SOPR ratio was at 0.89, which is significantly higher than the 0.48 and 0.50 levels seen at the 2018 and 2022 bear market bottoms, respectively.

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