5% fixed seems pretty arbitrary. Would be nice if this could be variable to get the desired liquidity properties, in some kind of feedback control system. I doubt there is one permanent ideal depreciation rate that could be determined ahead of time.

I realize that would be harder to design but isnt a fixed depreciation just a hacky band aid solution compared to a properly designed "control system"?

The ideal target variable might be: what % of existing money that was transacted per month perhaps? Make 50% the target and adjust the depreciation to track this target. Then we get into a debate about that 50% number, but at least we are getting closer to measuring the effect we want.