The native token of Raydium, RAY has suffered a sharp 31% drop, reaching its lowest price since October 2024. The price drop has occurred as speculation is growing that Pump fun, a major Solana-based meme coin-centric launchpad, is testing out its own Automated Market Maker (AMM), They plan to divert liquidity away from Raydium, which is also reducing trading volume.
The speculation picked up traction after an on-chain analyst trenchdiver released a test AMM interface at the amm.pump.fun. The finding quickly spread across X (formerly Twitter), with investors worried about the long-term strategy of Pump.fun as well as the general impact that this has on Raydium’s market position.
Pump. fun’s AMM Threatens Raydium’s Business Model
Raydium has been a beneficial liquidity provider in the Solana ecosystem, benefiting from its partnership with Pump.fun. The Launchpad allows users to create and trade meme coins, with successful tokens entering Raydium’s liquidity pools. In return, Raydium earns 0.25% swap fees which in turn makes them more popular with the firm.
However, if Pump.fun were to fully develop its own AMM it could bypass Raydium and instead keep swap fees and liquidity incentives within its own ecosystem. This action would lead to a reduction in the trading volume of Raydium along with an increase in the market volume of Pump.fun in the Solana Decentralized Exchanges (DEX) sector.
Market Reaction and Uncertainty
Neither Pump.fun nor Raydium have issued an official statement, leaving the market to react based on speculation. Following the passing of the information, RAY’s price saw a significant drop. reflecting investor concerns over a potential loss of revenue streams.
The first token that has been reportedly tested on Pump.fun’s AMM, is CRACK, a meme coin. If this test shows that the test period is successful, Pump.fun may fully transition to its own liquidity pools, thereby discontinuing its dependency on Raydium.
As Solana’s liquidity battle continues to heat up, Raydium may need to adjust its strategy to retain its market position. With traders closely watching Pump.fun’s next steps, the future of Raydium’s role in Solana’s DEX landscape remains uncertain.
