How Does Token Staking Directly Reduce Token Velocity?
Token staking directly reduces velocity because the staked tokens are locked up for a specified period, making them illiquid and unavailable for immediate trading. This effectively removes them from the circulating supply used for transactions, decreasing the rate at which the average token changes hands.
The higher the percentage of the total supply that is staked, the lower the token velocity, which supports a higher price for the remaining liquid supply.
Glossar
Circulating Supply
Token ⎊ The circulating supply within cryptocurrency contexts represents the number of tokens currently available and actively traded on exchanges or held by investors, excluding those locked in smart contracts, staking agreements, or otherwise inaccessible.
Token Staking
Mechanism ⎊ Token staking represents a commitment of cryptographic assets to support network operations and validate transactions, frequently within Proof-of-Stake consensus protocols, effectively substituting computational power with economic incentive.