Over the past week, the price of Uniswap (UNI) experienced a 12% increase as investors turned to the leading decentralized exchange (DEX) amidst legal battles faced by centralized exchanges (CEXs). However, the price has now dropped by 3% after failing to break the critical $5 resistance level. The question now is whether the ongoing decline in network traction will further worsen the losses.

While Uniswap remains the largest DEX globally, it has been facing increasing competition from rivals such as PancakeSwap and Balancer in recent weeks.

The Uniswap team is now left with the challenge of attracting new investors and restoring confidence in the platform in the coming weeks.

Uniswap is Struggling to Attract New Users

According to data from Glassnode, Uniswap has been experiencing difficulties in attracting new demand in recent weeks. The number of new addresses created on the Uniswap network has shown a decline since reaching a high point on June 10. Specifically, there has been a 66% drop in new wallet addresses between June 10 and June 19, going from 733 to 440.

The decline in network growth, which measures the rate at which new users join the blockchain network by counting the number of new wallet addresses created daily, often has a negative impact on the price. If this trend continues, it could further contribute to the ongoing drop in the price of UNI.

Rival DEXs Are Encroaching Uniswap’s Market Share

Further confirming the bearish sentiment, Uniswap is also facing the loss of market share to its competitors in the DEX space. Between June 5 and June 7, when the Securities and Exchange Commission (SEC) announced its lawsuit against Binance and Coinbase, UNI transaction volume experienced a sharp increase of 900%. However, the transaction volume has since dropped by 1,200%, going from $79.4 million to $5.93 million as of June 18.

The transaction volume metric evaluates the dollar value of daily confirmed transactions involving a specific cryptocurrency asset, and it usually correlates with the price. Unless the Uniswap team is able to reverse this trend, the price of UNI may continue to decline in the coming days.

UNI Price Prediction: The Bears Could Target $3.75

According to IntoTheBlock’s IOMAP distribution data, UNI price is likely to enter a bearish downtrend towards $3.75. Currently, there are 1,360 investors who bought 9.66 million UNI tokens and are expected to provide significant support when the price approaches their average purchase price of $4.34.

If the expected support fails, the Uniswap price is likely to decline to $3.75. However, if the UNI price manages to rise above $4.70, it could negate the bearish narrative. Nevertheless, the resistance from the 2,300 addresses holding 5.2 million tokens at the maximum price of $4.70 could pose a significant challenge.