Improving the Equation of Exchange for Cryptoasset Valuation Using Empirical Data

TL;DR

This paper refines the equation of exchange for cryptocurrency valuation by addressing its limitations in relating token velocity and holding time, using empirical data to improve accuracy and insight.

Contribution

It introduces an improved model that better captures the relationship between token velocity and holding time in cryptoasset valuation.

Findings

Enhanced valuation accuracy demonstrated with empirical data

Better understanding of token velocity and holding time relationship

Refined equation improves cryptoasset pricing models

Abstract

In the evolving domain of cryptocurrency markets, accurate token valuation remains a critical aspect influencing investment decisions and policy development. Whilst the prevailing equation of exchange pricing model offers a quantitative valuation approach based on the interplay between token price, transaction volume, supply, and either velocity or holding time, it exhibits intrinsic shortcomings. Specifically, the model may not consistently delineate the relationship between average token velocity and holding time. This paper aims to refine this equation, enhancing the depth of insight into token valuation methodologies.