Raydium (RAY) Token Slumps 25% on Rumors That Memecoin Launchpad Pump.fun Is Testing Its Own Automated Market Maker (AMM)

Experts say Pump.fun's AMM could bring higher fees and more revenue.

Raydium’s native token (RAY) price crashed by over 25% on Feb. 24 after rumors emerged that memecoin launchpad Pump.fun is testing its own automated market maker (AMM).

The speculation raised concerns that Pump.fun’s new feature could siphon off Raydium’s trading volume, potentially depriving it of a key revenue stream.

The rumors first surfaced when an onchain investigator, known as “trenchdiver” on X, shared a claim that Pump.fun is setting up and testing an AMM liquidity pool.

An AMM facilitates traders in buying and selling crypto against a liquidity pool, eliminating the need for another party to trade with. Raydium currently plays a pivotal role in this process by hosting Pump.fun tokens after they complete their initial trading phase.

However, if Pump.fun launches its own AMM, it could retain its trading fees instead of sharing them with Raydium.

Onchain investigator shares evidence of Pump.fun testing new liquidity pools

To substantiate the claim, trenchdiver shared a link to a Pump.fun-branded AMM interface, which showed that the feature is in beta testing.

Moreover, an onchain transaction from Feb. 20 seemed to show Pump.fun testing the feature by adding a token called Snowfall (CRACK) to its liquidity pool.

The token, which appears to be inspired by the 2017 TV series "Snowfall," saw a massive surge in value. It peaked at $5.4 million within an hour of trenchdiver’s post but quickly dropped 40%, bringing its market value down to $1.8 million.

Related: Law firms slam Pump.fun for hosting fake tokens amid lawsuit battle

Experts suggest Pump.fun’s AMM could lead to higher fees and revenue

If Pump.fun does launch its own AMM, Raydium could stand to lose a substantial revenue stream.

According to Shoal Research founder Gabriel Tramble, Raydium currently charges a 0.25% fee on swaps, which Pump.fun could set higher to double its revenue, assuming traders continue to use its platform.

Tramble also highlighted that many traders, known as "degens," are accustomed to paying high trading fees, which could enable Pump.fun to profit from its own AMM without losing users.

Meanwhile, podcast host Tyler Warner succinctly described Raydium’s situation as "falling off a cliff," referring to its steep price decline.

Despite the rumors, Pump.fun has yet to make any official announcements regarding the launch of its own AMM pools.

However, data from DefiLlama shows that since its launch in January 2024, Pump.fun has already collected over $500 million in fees, attesting to its growing footprint in the market.