Raydium’s native token, RAY, took a sharp hit on Sunday, plunging nearly 30% following speculation that meme coin launchpad Pump.fun is developing its own automated market-making (AMM) system.
The rumor emerged from an X post by the account “trenchdiver” on February 24, claiming that Pump.fun is actively testing AMM liquidity pools. This feature would allow users to trade cryptocurrencies against liquidity in a smart contract instead of traditional counterparties.
Pump.fun’s Alleged AMM Testing Sparks Market Reaction
The speculation gained traction after “trenchdiver” shared a link to a website displaying an AMM interface branded with Pump.fun’s logo. The site indicated that the feature is currently in beta testing.
Adding fuel to the rumors, an on-chain transaction dated February 20 showed Pump.fun adding its first test token, Snowfall (CRACK), to its AMM liquidity pool.
Named after the 2017 TV series Snowfall, which dramatizes the 1980s crack epidemic, the test token skyrocketed in value. Within an hour of “trenchdiver’s” post, Snowfall surged to a peak market cap of $5.4 Billion, according to data from DEX Screener.
The news sent shockwaves through the market, causing RAY to drop to $3.08. Despite this steep decline, Raydium’s 24-hour trading volume surged by an astonishing 317.19%, while its total market cap now stands at $897.31 million.
What Is an Automated Market Maker (AMM)?
An automated market maker (AMM) is a decentralized trading system that replaces traditional order books with algorithmically managed liquidity pools. Instead of relying on buyers and sellers, users deposit funds into shared liquidity pools.
Prices are automatically adjusted using mathematical formulas to ensure a balanced trading environment. This system allows for continuous trading without intermediaries, making it a key component of DEXs.
Pump.fun’s potential entry into the AMM space could be a game-changer, as it would enable traders to bypass Raydium’s platform, potentially diverting a significant portion of its trading volume.
If the rumors hold true, Raydium could face stiff competition, impacting the long-term value of RAY.
Also Read: Pump.fun Hits New High; Surpasses $60M in Monthly Volume for Second Straight Month
Raydium’s TVL Continues to Surge Despite Token Drop
Despite the bearish sentiment surrounding RAY, Raydium’s Total Value Locked (TVL) continues to climb. According to DeFiLlama data, the DEX hit an all-time high of $2.589 billion in locked assets today. This marks an extraordinary rise from just $128 million at the start of 2024, indicating that investors are still pouring money into the platform.
While RAY’s price drop suggests uncertainty among traders, the soaring TVL signals strong confidence in Raydium’s underlying ecosystem. If Pump.fun’s AMM launch proves to be a real threat, Raydium may need to innovate and adapt quickly to maintain its market dominance.
Pump.fun Faces Legal Challenges
Adding to the turmoil, Pump.fun is currently facing legal troubles. A proposed class-action lawsuit accuses the company and its executives of violating U.S. securities laws.
The lawsuit alleges that Pump.fun earned nearly $500 million in fees while operating without proper regulatory compliance. If the case gains traction, it could add another layer of uncertainty to the platform’s future.
For now, the crypto community is watching closely to see whether Pump.fun’s AMM will officially launch—and whether it will pose a real challenge to Raydium’s position as a leading decentralized exchange.
Also Read: Pump.fun Founder Calls For Stricter Guardrails On Token Launchpads Following LIBRA Memecoin Fallout