From cointelegraph by JESSE COGHLAN

The token for the Solana-based decentralized exchange (DEX) and automated market maker (AMM) Raydium dived on Feb. 24 amid speculation that the memecoin launchpad Pump.fun is working on a similar AMM feature.

The rumor came from the X account “trenchdiver,” who said in a Feb. 24 post that Pump.fun was working on and testing its own AMM liquidity pools — a feature that would users to trade crypto against liquidity in a smart contract instead of against a counterparty.

The account shared a link to a website showing an interface for an AMM with Pump.fun’s branding that notes the feature is in beta.

A Pump.fun-operated AMM could remove a portion of Raydium’s business, as currently when a Pump.fun token sees enough trading activity, it completes what’s known as a “bonding curve,” and the token is launched on Raydium for further trading.

“It seems they are planning to have pump tokens graduate to their own pools instead of Raydium so they can either extract more fees on Solana or have some mechanism to reward token holders,” trenchdiver said.

A Feb. 20 onchain transaction shared by trenchdiver apparently shows Pump.fun adding its first test token to its AMM liquidity pool.

The test token, called Snowfall (CRACK), seemingly named after a 2017 TV series of the same name dramatizing the 1980s crack epidemic, shot up to a peak value of $5.4 million an hour after trenchdiver’s post, according to DEX Screener.

Source: trenchdiver

It has since seen significant volatility, with its price falling around 40% in the last hour and its market capitalization dropping to around $1.8 million.

Related: ETF approval will help Solana break the ‘memechain’ narrative 

Pump.fun has not publicly acknowledged or confirmed plans to launch its own AMM pools.

Meanwhile, podcast host Tyler Warner said on X that Raydium 

RAY$3.13was “falling off a cliff” after trenchdiver’s post, with the token down 25% to $3.22 over the last 24 hours,accordingto CoinGecko.

RAY’s price over the last day took a sharp fall after purported evidence showed Pump.fun was testing its own AMM protocol. Source: CoinGecko

Shoal Research founder Gabriel Tramble said on X that the standard Raydium AMM takes a 0.25% fee on swaps, but Pump.fun could place a higher fee on swaps and “potentially double its revenue if market conditions persist” with its own AMM pools.

“Degens are accustomed to paying high fees for trades,” he added.

DefiLlama data shows Pump.fun has collected a total of over $500 million in fees since it launched in January 2024.