The equation of exchange is used in the Eat Sleep Crypto valuation framework, and in tokenomic architecture, analysis, and design.

To do this, the Equation of Exchange is reordered to solve for monetary base, M.

This gives us, M = PQ/V

We define M, the monetary base as including all circulating coins – not those on exchanges, lost, or burned.

M divided by circulating supply to find the price floor of a coin.

Other inputs are required to value cryptocurrencies with the equation of exchange.

First, circulating supply – the actual number of coins still accessible and in “hot wallets,” ready to be spent or sold, must be estimated.

Second, irrelevant transactions (e.g. speculative transactions, self-transfers) must be excluded from calculations.

Third, distinct uses for tokens must be identified and evaluated separately before combining them to find a price floor.

You’ll learn how in Valuation Methods: Identifying Circulating Supply and Valuation Methods: Estimating Velocity and using off-chain data in Valuation Methods; Finding PQ.