Velocity, Holding Time and Lifespan of Cryptocurrency in Transactions

TL;DR

This paper introduces a novel method to measure cryptocurrency velocity by combining holding-time and lifespan distributions, demonstrating high accuracy with limited data and applicability to real digital currencies like Cardano.

Contribution

The paper proposes a new approach to calculate money velocity using distribution analysis, applicable to digital currencies and requiring minimal data for accurate estimation.

Findings

High accuracy in velocity estimation with limited data

Method successfully applied to Cardano cryptocurrency

Potential for real-world digital money velocity measurement

Abstract

The measurement of the velocity of money is still a significant topic. In this paper, we proposed a method to calculate the velocity of money by combining the holding-time distribution and lifespan distribution. By derivation, the velocity of money equals the holding-time distribution's value at zero. When we have much holding-time data, this problem can be converted to a regression problem. After a numeric simulation, we find that the calculating accuracy is high even if we used only a small part of the holding time data, which implies a potential application in measuring the velocity of money in reality, such as digital money. We also tested the methods on Cardano and found that the method can also provide a reasonable estimation of velocity in some cases.