ETH Velocity

Definition ∞ ETH velocity measures the frequency at which Ether tokens are transacted across the Ethereum network within a given period. This metric provides insight into the transactional activity and usage patterns of Ether. A higher velocity indicates more frequent movement of tokens, potentially signaling increased network utility or speculative trading. Conversely, a lower velocity may suggest that holders are retaining their Ether for longer durations.
Context ∞ ETH velocity is a critical on-chain metric frequently cited in market analysis to gauge the vibrancy of the Ethereum ecosystem. Changes in ETH velocity can correspond with significant network events, such as upgrades or shifts in decentralized finance activity. Observing this metric helps market participants understand whether Ether is being actively used for applications or primarily held as an investment, informing broader market sentiment.