Yea, it’ll lose velocity. All opjects falling have a terminal velocity where the effect of gravity is equalled by drag against its fall. For a bullet shot straight up it’ll hit an apex, stop, then fall back in tumble never picking up enough speed to easily kill.
When you fire it in an arc, it maintains horizontal velocity and it never comes to a full stop in flight. Instead it maintains a fairly stable trajectory and will hit much harder and can possibly kill.
Still, keep in mind a bullet in complete free fall could still fatally injure someone though odds are reduced. It’ll hit like a real heavy hailstone.