What Is the ‘Equation of Exchange’ (MV = PQ) and How Is It Applied to Crypto?

The Equation of Exchange (Money Supply (M) x Velocity (V) = Price Level (P) x Quantity of Transactions (Q)) is adapted for crypto valuation to model the relationship between the token's supply and the network's economic activity. By rearranging it to Price (P) = (M x V) / Q, analysts can estimate the required market capitalization (M) for a given level of network activity (PQ) and velocity (V).

The key challenge is accurately forecasting V and Q.