Definition ∞ BTC Velocity measures the rate at which Bitcoin changes hands within a specific timeframe. This metric indicates how frequently individual Bitcoin units are transacted across the network. A higher velocity suggests more active circulation and utility, while a lower velocity might imply increased holding or reduced transactional use. It is calculated by dividing the total transaction volume by the average network value.
Context ∞ Analysts often examine BTC velocity to gauge market activity and sentiment. A declining velocity, for example, might suggest that more participants are holding their Bitcoin rather than spending or trading it, potentially indicating a belief in future price appreciation. Conversely, a rising velocity could signal increased speculative trading or greater utility in commerce. Monitoring this metric helps observers assess the health and liquidity of the Bitcoin ecosystem.
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