What Is the Quantity Theory of Money (QTM) Model’s Application in Crypto Valuation?

The QTM model, MV=PQ, is adapted for crypto by relating the token's market capitalization (M x V) to the total value of transactions (P x Q) facilitated by the network. M is the token supply, V is velocity (how often a token changes hands), P is the price level of goods/services, and Q is the quantity of transactions.

Estimating future P x Q and V allows investors to back-calculate a theoretical market cap, thus deriving a target token price. A lower velocity generally implies a higher potential price for a given level of network activity.