What Is the Velocity of a Token and How Does It Affect Its Value?

The velocity of a token refers to how frequently it is used or traded within a given period. A high velocity means that the token is changing hands often.

According to the equation of exchange (MV = PQ), a higher velocity can lead to a lower token value, as each token is used more efficiently to support the same level of economic activity. Therefore, projects often try to design their tokenomics to encourage holding rather than frequent trading.