Velocity measures the rate at which coins circulate through the network economy within a given period, capturing how actively the existing supply is being transacted relative to the total amount in existence - analogous to the economic concept of money velocity applied to on-chain activity.
A rising velocity indicates that coins are changing hands more frequently - reflecting increased economic activity, higher trading turnover, or broader network utilization. A declining velocity suggests coins are moving less - consistent with long-term holding behavior, reduced on-chain engagement, or supply being locked away in cold storage and dormant addresses. Prolonged low velocity alongside rising prices has historically been associated with supply scarcity dynamics, where a large portion of circulating supply is effectively removed from active circulation by conviction holders.
Tracked alongside active addresses, transaction volume, and long-term holder metrics, Velocity provides a macro-level view of how productively the circulating supply is being utilized - helping distinguish between markets driven by genuine transactional demand and those where price appreciation is occurring against a backdrop of increasingly illiquid, dormant supply.
