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Ethereum now has more active addresses than bitcoin, traders have turned bearish on the world's largest cryptocurrency, in a hint that the market is becoming more volatile.

Data from Bitinfocharts shows with 757,859 active addresses, ethereum has roughly 49,154 more than bitcoin, which has 708,705. From a high of 1.1 million in April, the total number of active addresses on the bitcoin network has plummeted by 38%.

There could be a lot of explanations for bitcoin's drop, Justin d'Anethan, head of sales at crypto-trading firm Eqonex. These include the cryptocurrency's massive sell-off in May and bitcoin miners' hashing power being reduced as a result of China's mining restrictions, he noted.

"This, together with ethereum's ascent and utility," d'Anethan continued, "would have contributed to ethereum exceeding bitcoin in terms of active addresses."

More than 90% of bitcoin mining operations in China have reportedly shut down as a result of the Chinese prohibition. Ether production was also impacted, but any negative effects are expected to be alleviated by the upcoming 2022 upgrade to ethereum 2.0, which would eliminate the need for mining.

The decrease in active addresses indicates that bitcoin demand is rapidly waning as more individuals sell the cryptocurrency. Traders may be waiting to purchase the dip at the same time. According to certain market analysts, this is a pessimistic trend for the cryptocurrency's price.

Bitcoin's price has dropped over 50% since its peak of $64,829 in mid-April, trading at around $33,482 on Friday morning. The ether token ether has dropped 11% to roughly $2,039 over the same time period, and is down more than 50% from its all-time high of $4,380 in May.

Given the simplicity of use of its token and the flexibility of the technology that underpins the network, several analysts believe ethereum is primed to break out. The decentralised platform is also used to create "smart contracts" and other applications that are difficult to hack. "Because of the maturity of its ecosystem, Ethereum is and has always been the platform of choice for writing smart contracts. As a result, ethereum has become the preferred platform for developing decentralised apps "d'Anethan remarked.

Savings, lending, trading, asset management, and insurance are among the DeFi apps available, as are creative media such as painting and music with NFTs, as well as game worlds with their treasures.

Companies like Compound, UniSwap, and SushiSwap have a high rate of adoption of such decentralised financial, or DeFi, applications, according to d'Anethan. Because these apps are often built on ethereum, the number of active addresses has increased, he explained.

"Ethereum addresses empower users to be economic agents in a digital environment," according to Lex Sokolin, a chief economist at blockchain firm ConsenSys.