This graph shows the average number of times that a token changes wallets each day.
Simply put, a higher token velocity means that a token is used in transactions more often within a set time frame.
Token Velocity can be used to explain various noteworthy events in the life of a project. For example, here’s Ethereum:
Notice the steep drop off?
The increased activity (and subsequent dip) correlates squarely to a huge ETH mixer that operated between March 2017 and March 2018.
Once the mixer was liquidated, token velocity toppled back to ‘normal’ levels, where it’s remained ever since.