Raydium (RAY) Token Drops 25% Amid Speculation That Pump.fun Is Building a Competing AMM

The token of Raydium, a Solana-based DEX and AMM, declined on Feb. 24 amid growing speculation that Pump.fun is developing a competing AMM.

The token of Raydium, a Solana-based decentralized exchange (DEX) and automated market maker (AMM), saw a 25% decline on Feb. 24 amid growing speculation that Pump.fun is developing a competing AMM.

An X user going by the handle “trenchdiver” claimed on Feb. 24 that Pump.fun has been working on and testing AMM liquidity pools, which would allow users to trade assets against liquidity stored in a smart contract rather than engaging directly with another trader.

A website linked by the account showed an AMM interface under Pump.fun’s branding and specified that the feature is in its beta stage.

With Pump.fun reportedly developing its own AMM, Raydium stands to lose part of its revenue, as Pump.fun tokens currently complete a “bonding curve” after reaching a trading threshold before transitioning to Raydium.

“It seems they are planning to have pump tokens graduate to their own pools instead of Raydium so they can either extract more fees on Solana or have some mechanism to reward token holders,” wrote trenchdiver.

According to an on-chain transaction from Feb. 20, which was posted by trenchdiver, Pump.fun may have initiated its AMM liquidity pool by adding a test token.

DEX Screener data showed that Snowfall (CRACK), a test token likely named after the 2017 TV series about the 1980s crack crisis, hit a peak of $5.4 million within an hour of the X post.

The token has since seen major price swings, with its value dropping 40% in the last hour and its market cap falling to around $1.8 million.

Pump.fun has not made any public announcements to confirm whether it is working on its own AMM pools.

According to CoinGecko, Raydium’s token dropped 25% to $3.22 in the past 24 hours, prompting podcast host Tyler Warner to comment on X that it was “falling off a cliff” following trenchdiver’s post.

Shoal Research’s Gabriel Tramble wrote on X that while Raydium's AMM charges a 0.25% swap fee, Pump.fun could implement a higher fee and “potentially double its revenue if current market conditions last” by using its own AMM pools.

“Degens are used to paying high fees for trades,” he added.

Pump.fun has earned over $500 million in trading fees since going live in January 2024, according to figures from DefiLlama.

Recently, in the wake of "Libragate," Pump.fun's founder has pushed back on the memecoin narrative. The Libragate incident follows some investors filing a lawsuit against the platform, arguing that memecoins launched on the platform were subject to securities laws.