THE VELOCITY OF MONEY The standard formula for velocity of money is: velocity (V) = Nominal GDP / Money Supply Nominal GDP: Total value of goods and services produced in an economy, measured at current prices (not inflation-adjusted). Money Supply: Typically M1 (cash + checking deposits) or more commonly M2 (M1 + savings deposits, money market funds, etc.). Velocity measures the average number of times a unit of currency (e.g., one dollar) is spent on goods and services in a given period, usually a year. In traditional economies, velocity interacts with money supply to drive economic activity. If money turned over only once per year, the money supply would closely track spending, inflation, or deflation. Higher velocity amplifies the effective money supply, boosting output and potentially prices (inflation). ***But here's the key distinction for Bitcoin: Conventional velocity thinking may not apply cleanly during its adoption phase. Bitcoin remains in a multi-year accumulation and distribution stage. Low velocity and concentrated ("lumpy") holdings by large players (whales, institutions, long-term holders) are often interpreted as proof that Bitcoin is primarily a store of value ("digital gold") rather than a medium of exchange. I argue the opposite sequence may be more accurate for new money: it first behaves as a store of value during adoption, building credibility and stability, before volatility decreases enough to support everyday use as a medium of exchange. As long as Bitcoin has experienced rapid price appreciation relative to the USD (and even goods/services), people naturally prefer to hold and accumulate rather than spend. Spending feels like giving up an asset that's outperforming everything else.Yet the universe tends to unfold as it should. Those unexpected bear markets — like the recent drop from ~$125,000 to $60,000 — may serve as necessary "grease" to encourage spending. Long-held Bitcoin from decade-old wallets is increasingly moving, not just for profit-taking but for real-world purchases. There is also actual spending: High-end homes (and other big-ticket items) have been bought directly with Bitcoin in the past year or so, often without fiat conversion. Some of these properties have even appreciated in BTC terms after purchase — meaning the Bitcoin spent has effectively "underperformed" the asset acquired, flipping the usual hodl incentive. That, ladies and gentlemen, is the beginning of Bitcoin functioning as a medium of exchange. It's nascent, luxury-focused, and far from daily coffee purchases, but it's real progress. In the long run, this is healthy. Bitcoin "should" evolve into a robust payment rail — if not a daily medium of exchange, then at least a reliable one for high-value transfers. Sound money isn't truly sound if it's never used as money. I hope this message finds you well.