What Is the Impact of a Token’s Liquidity on Its Velocity?

A token's liquidity, or the ease with which it can be bought or sold without significantly impacting its price, has a complex relationship with velocity. High liquidity generally facilitates higher velocity as tokens can be traded more easily.

However, low velocity (strong holding incentive) can sometimes lead to lower liquidity in the open market, as fewer tokens are available for trading. Ultimately, low velocity (high holding) is the desired state for intrinsic value, even if it slightly reduces market liquidity.