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5/ This suggests that store-of-value and medium-of-exchange uses are in opposition. Hodlers want high prices, which means a slow network. Exchangers are price-indifferent but want speed.
6/ This makes investing in tokens for any non store-of-value a sketchy proposition. An effective enabler of exchange (financial, storage, CPU, bandwidth, whatever) must be fast & low-friction, which is opposed to token appreciation.
Via @AriDavidPaul, here's a more detailed explanation by @cburniske of how velocity relates to price for cryptocurrency using the equation of exchange:https://medium.com/@cburniske/cryptoasset-valuations-ac83479ffca7 …
Isn't P in the exchange equation the price level, which in turn is inversely proportional to the value of the currency in question?
Causality in the exchange equation can be deep, but analyzing a change in V is easy: Since M is constant, Q is constant, and P (vs. any other currency) floats, P will change directly inverse to V.
agreed, but is P the price level of goods in the economy or the price of (for instance) 1 BTC? these change inversely as well, no?
P is the price level of things denominated in the token. So, if BTC velocity doubles, price of everything denominated in BTC halves - including BTCUSD, BTCEUR, BTCETH.
That means BTC is appreciating relative to them, no? Which seems to be contrary to your initial assertion.
Yes, thanks, it's BTCUSD which doubles. 2x velocity = 2x money chasing same goods = 2x money needed to buy a good. 2x BTC velocity = 2x BTC needed to buy same USD.
I knew all those hours filling up squares in khan academy would pay off!! :)
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