What Is the Economic Argument for a Token’s Velocity Trending towards Its Minimum Possible Rate?

The economic argument is that protocols benefit from a low velocity because it increases the required market capitalization (M P) for the same level of economic activity (P Q), thus increasing the token's price. Mechanisms that incentivize holding, such as staking, governance lock-ups, or use as collateral, reduce the number of tokens available for transactions, lowering velocity.

The minimum velocity is achieved when the token is held only for its utility or yield, not for immediate spending.