Uniswap (UNI) price crashed to a crucial support level and did not participate in the recent crypto market bull run.

Uniswap (UNI) has been hovering around $5.30 over the past four weeks, a price that's down 72% from its December highs.

Uniswap price crashed to a crucial support level and did not participate in the recent crypto market bull run.

What's worse, the DeFi protocol's recently launched Unichain network is performing remarkably well, indicated by third-party data. Both volume and active addresses are rising.

This begs the question: Is there any potential for a short squeeze on UNI price in the coming weeks?

Unichain had over 3.285 million active addresses in the last seven days, according to Nansen data. This made it the sixth-biggest chain in this metric, overtaking popular networks like Ethereum (ETH), Polygon (POL), Sei (SEI), and Arbitrum.

Unichain's active transactions increased by 121% to 9.48 million, compared to 8.63 million for Ethereum. Similarly, the network's fees soared by 84% to 8.6k.

Unichain is also becoming a top player in the decentralized exchange industry, indicated by data from DeFi Llama. Its network processed tokens worth $1.7 billion in the last seven days, a 36% increase from the previous period. This brings the monthly transactions to over $3.2 billion.

This growth is impressive considering that Unichain was launched in February.

Meanwhile, Uniswap continues to hold a significant market share in the decentralized finance sector despite rising competition. Its network processed $61.4 billion in transactions over the last 30 days - more than PancakeSwap and Raydium combined.

This performance has enabled Uniswap to make substantial fees this year. TokenTerminal data indicates that it has generated over $328 million this year, compared to Ethereum's $242 million. These fees are usually routed to liquidity providers on the network.

Uniswap price may be setting up for a short squeeze

The weekly chart shows that UNI price has dropped to a significant support level around $5, where it has repeatedly held throughout the year. This level also coincides with a trendline connecting the lowest swing points since June 2022.

Moreover, UNI has formed a broadening wedge pattern, commonly known as a megaphone - often interpreted as a bullish reversal signal.

Given this technical setup and the recent swarm of bearish bets on Uniswap, indicated by derivative metrics, there is potential for a short squeeze in the coming weeks.

If the bears attempt to push UNI price lower, leading to a breakdown of the wedge pattern and the crucial support level at $5, then the next downside target to watch could be around $3. This level is reached by extending the Fibonacci retracement from the December lows to highs.

Conversely, if the bulls manage to rally UNI price and close a weekly candle above the wedge pattern, then the initial upside target to consider is last year's high of $19.30, which would represent a 255% increase from current levels.

This rally could continue to the December 2021 highs of $24.10 or the round number of $25.