Raydium's RAY Token Drops 25% Following Pump.Fun's AMM Test Announcement
Crypto observers noted that the popular Solana platform, Pump.Fun, is testing its own AMM, affecting the sentiment for Raydium's tokens.
Key Takeaways:
- The Solana-based token issuance platform, Pump.Fun, might be rolling out its own Automated Market Maker (AMM) soon.
- The AMM, accessible at
amm.pump.fun, indicates a developing swap product with buy and sell options, marking the first of its kind for Pump.Fun. - Although part of Raydium’s trading volume originates from Pump tokens, Raydium supports numerous other significant markets.
Overview:
The Solana token issuance platform, Pump.Fun, is reportedly on the verge of launching its own AMM based on information linked to its site. However, no official announcement has been made yet.
An AMM is a type of exchange mechanism in crypto markets that simplifies trading via a liquidity pool that typically includes at least two tokens. Rather than matching buyers and sellers like traditional exchanges, the AMM utilizes smart contracts to set prices based on supply and demand, enabling trades without requiring a counterparty.
Development Details:
The developing AMM will feature a swap product with engaging functions like buy and sell options, alongside deposit and withdrawal features—this is a pioneering approach for Pump.Fun, which allows users to issue a token for under $2 in capital. Users can select the token count, theme, and accompanying meme image.
When a token’s market capitalization hits $69,000, a fraction of its liquidity gets transferred to Raydium and subsequently burned, reducing the supply permanently.
The introduction of Pump.Fun’s AMM implies that tokens will no longer shift to Raydium, or at least this is the prevalent market sentiment, which has negatively impacted RAY tokens, causing a 25% drop within the last 24 hours.
Trader Insight:
Trader @trenchdiver101, who was among the first to highlight this trend, commented, “It seems they are planning to have pump tokens graduate to their own pools instead of Raydium. They can either extract more fees on Solana or have some mechanism to reward token holders.”
Despite a portion of Raydium’s trading activity being fueled by Pump tokens, the platform also caters to a variety of leading markets, like Solana (SOL) trading against stablecoins, contributing to Raydium’s impressive $500 million average daily trading volume.
Potentially, this development could further increase the revenue and profits for Pump.Fun, which has been stringently profitable over the past year—a rarity in an industry largely dependent on token sales for revenue. Since its launch in March 2024, Pump.Fun has accumulated over $550 million in total fees and recorded $2.4 billion in trading volumes over a mere two weeks. Over 8 million tokens have been generated on this platform, with certain tokens, such as fartcoin, achieving billions of dollars in market capital.
