Raydium’s token saw a 25% decline after an on-chain sleuth reported that Pump.fun is building a protocol that may disrupt a crucial income source for the DEX.
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 X user “trenchdiver” claimed on Feb. 24 that Pump.fun has been working on and testing AMM liquidity pools, which would let users trade assets against liquidity stored in a smart contract instead of engaging directly with another trader.
A website linked by the account displayed an AMM interface under Pump.fun’s branding and specified that the feature is in its beta stage.
With Pump.fun developing its own AMM, Raydium risks losing 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,” trenchdiver said.
According to an on-chain transaction from Feb. 20, which trenchdiver posted, Pump.fun may have initiated its AMM liquidity pool by adding a test token.
DEX Screener data shows that Snowfall (CRACK), a test token likely named after the 2017 TV series portraying the 1980s crack crisis, hit a peak of $5.4 million within an hour of trenchdiver’s post.
The token has undergone major price swings, with its value dropping 40% in the last hour and its market cap falling to roughly $1.8 million.
Pump.fun has not made any public announcement to confirm whether it is working on its own AMM pools.
As per CoinGecko, Raydium’s token has 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 posted on X that while Raydium’s AMM charges a 0.25% swap fee, Pump.fun might implement a higher fee and “potentially double its revenue if current market conditions last” by utilizing its own AMM pools.
“Degens are accustomed to paying high fees for trades,” he added.
Since going live in January 2024, Pump.fun has earned over $500 million in fees, according to figures from DefiLlama.
Recenty in the wake of Libragate, Pump.fun founder has urged caution on memecoins. The Libragate incident comes just weeks after some investors filed a lawsuit against the platform, arguing memecoins launched on the platform were subject to securities laws.
