Bitcoin Power Law Zones (Dunk)

Introduction When viewed on a standard linear chart, Bitcoin’s long-term price action can appear chaotic and exponential. However, when analyzed through the lens of physics and network growth models, a distinct structure emerges.

This indicator implements the Bitcoin Power Law, a mathematical model that suggests Bitcoin’s price evolves in a straight line when plotted against time on a "log-log" scale. By calculating parallel bands around this regression line, we create a "Rainbow" of valuation zones that help investors visualize whether the asset is historically overheated, undervalued, or sitting at fair value.

The Math Behind the Model The Power Law dictates that price scales with time according to the formula: Price = A * (days since genesis)^b

This script uses the specific parameters popularized by recent physics-based analyses of the network:

• Slope (b): 5.78 (Representing the scaling law of the network adoption). Amplitude (A): 1.45 x 10^-17 (The intercept coefficient).

While simple moving averages react to price, this model is predictive based on time and network growth physics, providing a long-term "gravity" center for the asset.

Guide to the Valuation Zones

• Upper Bands (Red/Orange):Extr. Overvalued, High Premium, Overvalued. Historically, these zones have marked cycle peaks where price moved too far, too fast ahead of the network's steady growth. The Baseline (Black Line):Fair Value. The mathematical mean of the Power Law. Price has historically oscillated around this line, treating it as a center of gravity.
• Lower Bands (Green/Blue):Undervalued, Discount, Deep Discount. These zones represent periods where the market price has historically lagged behind the network's intrinsic value, often marking accumulation phases.

Note: The lowest theoretical tiers ("Bitcoin Dead") have been trimmed from this chart to focus on relevant historical support levels.

How to Use

1. Logarithmic Scale: You MUST set your chart to "Log" scale (bottom right of the TradingView window) for this indicator to function correctly. On a linear chart, the bands will appear to curve upwards aggressively; on a Log chart, they will appear as smooth, parallel channels. Timeframe: This is a macro-economic indicator. It is best viewed on Daily or Weekly timeframes.
2. Overlay Labels: The indicator includes dynamic labels on the right-side axis, allowing you to instantly see the current price requirements for each valuation zone without manually tracing lines.

Credits This script is based on the Power Law theory popularized by Giovanni Santostasi and the original Corridor concepts by Harold Christopher Burger.

Disclaimer This tool is for educational and informational purposes only. It visualizes historical mathematical trends and does not constitute financial advice. Past performance of a model is not indicative of future results.

Further Reading
https://www.hcburger.com/blog/powerlaw/index.html
https://giovannisantostasi.medium.com/the-bitcoin-power-law-theory-962dfaf99ee9