Bitcoin velocity measures the rate at which Bitcoin changes hands within a specific timeframe. It quantifies how frequently a typical unit of Bitcoin is transacted on the blockchain. A higher velocity suggests more active use of Bitcoin for transactions, potentially indicating its utility as a medium of exchange. Conversely, lower velocity might point to Bitcoin being held as a store of value rather than actively circulated.
Context
The state of Bitcoin velocity is a key metric for analysts assessing the network’s economic activity and investor behavior. A significant debate concerns its predictive power for Bitcoin’s price movements, with some arguing that increasing velocity indicates growing adoption and demand. Future developments to watch include how scaling solutions, such as the Lightning Network, might influence on-chain velocity calculations by shifting a portion of transactions off the main chain.
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