Can High Inflation Indirectly Lead to a Higher Token Velocity?

Yes, high inflation can indirectly lead to a higher token velocity. If users anticipate that the value of their token holdings will be rapidly diluted by excessive issuance (high inflation), they are incentivized to spend or sell the token quickly to avoid loss of purchasing power.

This behavior increases the token's turnover rate, thereby increasing its velocity. A protocol must manage inflation carefully to prevent this flight from the token as a store of value.