The price of Raydium (RAY), a token for the Solana-based decentralized exchange (DEX), dropped 25% on February 24 after rumors spread that Pump.fun is testing a new automated market maker (AMM) feature. This could cut into Raydium’s revenue, causing concerns among investors.
Source: trenchdiver
Why is Raydium Falling?
A crypto analyst, trenchdiver, stated on X (previously Twitter) that Pump.fun is creating on-chain AMM liquidity pools in-house. This would allow traders to trade crypto for straight-up smart contract liquidity instead of counterparty. If Pump.fun moves forward with this, it could stop sending new tokens to Raydium, reducing its trading volume and fees.
Currently, Pump.fun launches tokens on Raydium after enough trading activity. If it keeps the process within its own platform, Raydium could lose a big source of business. Gabriel Tramble, founder of Shoal Research, said Raydium charges a 0.25% fee on swaps, but Pump.fun might increase swap fees and double its revenue if traders accept it.
Market Impact
After the rumors, Raydium’s token dropped from $3.22 to $3.20 in 24 hours, with crypto influencers saying it was “falling off a cliff.” Meanwhile, Pump.fun’s test token, Snowfall (CRACK), surged to $5.4 million in value but later dropped 40% within an hour.
Pump.fun has not officially confirmed the AMM plans, but it has already earned over $500 million in fees since launching in January 2024. If the new feature goes live, Raydium may face stronger competition in the Solana ecosystem.
