What Is the Concept of a “Money Demand Function” in the Context of Crypto Velocity?

The money demand function describes the factors that determine the quantity of a token users wish to hold. In crypto, this is influenced by the token's utility, the expected future price appreciation, and the opportunity cost of holding.

A strong money demand function (i.e. high desire to hold) translates directly into a low velocity, as tokens are taken out of circulation. Protocols aim to strengthen this function by enhancing utility and providing holding incentives.