The equation of exchange, MV = PQ is an algebraic equation used to solve for various components of a currency’s value.

It is typically reordered to solve for M by economists, who want find the necessary supply of a currency – the minimum monetary base – needed for commerce.

If more demand than currency exists, notes will trade above their face value.

Cryptocurrencies experience the same demand pressure, but don’t have this problem. Instead, their prices appreciate to meet demand for purchases.

Increasing demand pressure and decreasing circulating supply causes the price floor of a cryptocurrency to increase.

If a cryptocurrency’s price on exchanges is close to its price floor – the price below which it cannot sustainably trade – the traded price must also increase to meet demand for value to be transferred through it.

The Eat Sleep Crypto valuation framework uses the equation of exchange in this way to identify price floors and design tokens.