This edition of Knowledge Starts Here is based on the 2025 paper, “An Adoption Model of Cryptocurrencies” (European Journal of Operational Research), by Khaladdin Rzayev, Athanasios Sakkas, and Andrew Urquhart. As crypto assets find their place in the global financial ecosystem, much of the conversation has focused on regulation, volatility, and technology. Yet, a deeper driver quietly shapes everything from price discovery to market stability: user adoption. But not all adoption is created equal. Who joins the network and when—makes all the difference.
A new study takes this insight further by applying a well-known framework from the world of innovation diffusion: the Bass model, which classifies adopters into innovators and imitators. Innovators are the early entrants those who adopt based on their own information and conviction. Imitators are the followers those who join primarily because others already have. By splitting adoption into these two groups, the study offers a radically more insightful lens on crypto markets than total user growth alone.
The Bass diffusion model, introduced in 1969, has been a foundational tool in marketing and operational research to explain how new technologies or products are adopted. Applied to crypto, it draws a sharp line between two types of users.Innovators are the early adopters: developers, researchers, and tech-savvy users who take risks and explore emerging protocols based on intrinsic value or conviction. Their adoption is less dependent on others and more influenced by their own knowledge and foresight. On the other hand imitators, by contrast, are late adopters who often rely on social proof, price signals, or network effects. They’re more likely to enter after a coin has seen a price run-up or mainstream media attention.
The study by Rzayev, Sakkas, and Urquhart takes real-world blockchain data specifically, the number of active addresses across 77 crypto assets and models adoption stages using the Bass framework. The result is a decomposition of adoption data into two distinct curves: one for innovators, and one for imitators. But the real breakthrough is in how differently these two groups influence market outcomes.
Innovators Drive Price Discovery—and Performance
One of the study’s most important findings is – only early adoption by innovators is positively correlated with future returns. Crypto assets with strong innovator growth not only experience more price appreciation, but also deliver statistically significant alpha.
In contrast, imitator-driven adoption where the majority of users pile in after a price run has no such predictive power. In fact, total adoption (without distinguishing the type of user) turns out to be a noisy, often misleading signal of growth. The researchers construct hypothetical portfolios based on these findings. Digital Assets (tokens) with strong innovator adoption earn a risk premium of 18% per month, while imitator-heavy or general user-growth portfolios show no clear outperformance.
This has profound implications for investors. It suggests that monitoring the composition of adoption is more meaningful than watching raw wallet numbers. If new users are developers, power users, or institutions exploring the tech early, they likely signal long-term value. If new users are mostly late-stage retail participants following a meme-driven rally, the outlook could be less sustainable.
But why is early adoption more valuable?
From an economic perspective, early adopters represent transactional demand when it matters most when the ecosystem is still building, and network utility is just taking shape. These users are taking on higher risk but are also more aligned with the technology’s fundamentals. They’re the ones providing liquidity, testing infrastructure, and creating informational content.By contrast, imitators often enter after price signals have peaked. Their activity, while useful for broadening exposure, tends to follow, not lead the market. Their presence may inflate short-term metrics, but it does little to sustain long-term price momentum.
Beyond returns, the innovator-imitator lens also sheds light on market volatility. Innovators act like informed traders, driving price moves based on real signals such as news or protocol upgrades while imitators resemble noise traders, fueling volatility through trend-chasing. Both groups increase activity, but only one improves price efficiency. For investors, exchanges, and regulators, this distinction is crucial: knowing whether volatility stems from fundamentals or hype helps identify fragile moments versus durable trends.
Crypto markets are known for herd-driven rallies, but this study shows that price moves only gain predictive power when paired with adoption timing. The Bass model reveals: if rising prices attract imitators, reversals are likely; if they draw innovators, trends may sustain. Adoption-based signals outperform pure momentum, offering a smarter way to spot bubbles, swings, and true growth. In crypto, price without context is just noise.
Implications for India’s Crypto Ecosystem
For India, ranked #1 in global crypto adoption—the timing of these insights is crucial. Millions of young, first-time investors are entering the space. But more importantly, India is also the home to almost 12% of crypto developers as highlighted by a recent Electric Capital Report – the second largest in the world. As with any asset class, meaningful adoption isn’t just about numbers; it’s about intent and engagement. Being a young aspirational society, we need policies that reward developer participation and development of real-world use cases – lack of which may drive our youth from being innovators to being imitators – a situation which can easily be avoided.
