Raydium Solanas Largest DEX Surges 57 in Two Days Messari Reports 100x Annual Trading Volume Increase Whats Driving the Rise

As Bitcoin continues to hit all-time highs and the market thrives, Solana is not far behind, recently reaching the 200 mark. Meanwhile, RAY, the token of Raydium, the largest decentralized exchange on Solana, saw a maximum increase of 57% within two days, prompting holders to exclaim about the rapid return of the bull market. This article will analyze the third-quarter research report on Raydium by the cryptocurrency research organization Messari, exploring the characteristics and various data of Raydium.

In March, Raydium officially surpassed Orca to become the largest DEX on Solana

Raydium is an AMM (Automated Market Maker) decentralized exchange (DEX) on Solana, meaning liquidity providers can earn transaction fees when trading in liquidity pools. RAY holders can also stake RAY to earn additional RAY tokens. The protocol was launched in 2021, with investors including Coinbase Ventures.
Raydium offers Concentrated Liquidity Market Maker (CLMM) pools, which allow liquidity to be concentrated within a specific price range. Additionally, Raydium provides the Burn & Earn feature, which allows token teams that establish liquidity pools to permanently lock CLMM liquidity. The “burning pool” mentioned during meme coin hype actually refers to this. However, the Burn & Earn feature allows creators of liquidity pools to forgo tokens while still earning revenue, increasing their willingness to burn them.
Until March 2024, Orca was the leading DEX in trading volume on Solana. It was the first company to offer concentrated liquidity pools, which provide traders with lower slippage and liquidity providers with higher fee income, but also magnify the risk of impermanent loss. Solana introduced CLMM in November 2022, and from March 6, 2024, its daily trading volume surpassed Orca.

Messari optimistically predicts Raydium can maintain high trading volumes

Source: Messari
Starting with trading volume, although the average daily trading volume in Q3 2024 was $785 million, a significant 133-fold increase compared to $5.9 million in Q3 2023, this figure actually decreased by 14% compared to $918 million in the second quarter. In fact, since the first quarter of this year, the average daily trading volume has been more than a hundred times that of last year’s Q3 for three consecutive quarters. Various signs indicate that such a level of trading volume may have become normal for Raydium.
This growth is largely attributed to the meme craze, as pump.fun simplified the token issuance process, allowing users to start trading by simply choosing a token name, code, and image. Once a token is hyped on pump.fun to a market value of $69,000, it automatically lists on Raydium and a liquidity pool of $12,000 is automatically opened.
(Venture capital partner Adam Cochran: “The meme craze is ending” Data reveals Pump.fun’s token issuance success rate is only 1.4%)

Meme coins account for 15% of Raydium’s trading volume

Next, we examine the trading content. Meme coins are the second-largest asset in trading volume on Raydium, consistent with the previous description. In the third quarter, Raydium’s total trading volume was approximately $96.963 billion, with the trading volume proportions as follows:
Native assets: 72.81%
Meme coins: 15.26%
Stablecoins: 10.00%
Governance tokens: 0.52%
Liquidity-staked coins: 1.00%
Game tokens: 0.04%
Others: 0.37%

Source: Messari
However, stablecoins and liquidity-staked coins were the only token categories with growth in trading volume. Stablecoin trading volume grew by 19% to $9.7 billion compared to the previous quarter, while liquidity-staked coins increased by 24% to $970 million. In contrast, the top two tokens by trading volume (native token SOL and meme) both saw a decline. Native SOL trading volume fell by 12% to $70.6 billion, while meme trading volume declined by 53% to $15.6 billion.

Raydium rises to the third-largest exchange with a 130% quarterly increase in trading volume

Raydium’s share of total DEX trading volume increased by more than 130% quarter-over-quarter, reaching over 10%. In the third quarter, among the top six DEXs, only Aerodrome on the Base chain had a larger increase in trading volume than Raydium. Raydium’s trading volume surpassed Orca in the third quarter, becoming the third-largest DEX, only behind PancakeSwap and Uniswap.
Messari’s report indicates Raydium’s success not only represents the advantages of the protocol itself but also reflects the increase in Solana’s trading volume. In the third quarter, Solana DEX trading volume was second only to Ethereum, making it the second-largest public chain by trading volume.

The circulating market cap of RAY tokens increased by 4%, and team tokens are fully unlocked

Regarding the RAY token, the circulating market cap increased by 4% in the third quarter, reaching $486 million. Meanwhile, Solana’s circulating market cap increased by 6%. Of RAY’s maximum supply of 555 million, 34%, approximately 188.7 million, is reserved for mining, with an annual supply of about 1.9 million. The team and community received about 25.9%, which was fully unlocked by February 2024.
Additionally, RAY has three functions:
Staking RAY to earn RAY tokens as rewards: The current annualized return for staking RAY is about 5%.
RAY liquidity provision rewards: Raydium rewards liquidity providers in certain liquidity pools with RAY tokens.
Governance: Creating a proposal on Raydium requires at least 1 million RAY, with each token equivalent to one vote on active proposals. By the end of the third quarter, there had been two proposals.

Protocol revenue hits a record high, with part of the revenue used for token buybacks

Third-quarter protocol revenue increased by 5%, reaching a historical high of $16 million. These fees are used to buy back RAY from the open market, but since the price increase of RAY tokens exceeded protocol revenue, the quantity of RAY bought back in the third quarter decreased by 7%.
Twelve percent of the earnings from liquidity pools are used for RAY buybacks, while for AMM V4 liquidity pools, the remaining 88% of fees are proportionally distributed to liquidity providers in the pool. CLMM and CPMM distribute 84%, with the remaining 4% allocated to the treasury. Earnings from CLMM and CPMM pools are automatically converted to USDC and stored in the treasury by the protocol. Additionally, by the end of the third quarter this year, Raydium had generated over 161,000 SOL in liquidity pool creation fees.
On Raydium, liquidity pool creators can choose the type of liquidity pool based on trading fees:
Standard AMM (AMM V4): 0.25%
Concentrated Liquidity (CLMM): 0.01%, 0.02%, 0.03%, 0.04%, 0.05%, 0.25%, 1%, 2%
Constant Product (CPMM): 0.25%, 1%, 2%, 4%

Various upgrades and collaborations in the third quarter maintain Raydium’s competitiveness

Regarding protocol progress, in July, Raydium introduced a referral mechanism familiar to Chinese users. Referrers can copy their unique trading links (Blinks), and if someone completes a trade through the Blink link, the referrer can earn 1% of the SOL reward. In August, more granular fee tiers were added for CLMM and CPMM liquidity pools, Burn & Earn was launched in September, and Teleport (cross-chain from Ethereum to Solana) was introduced in October.
Significant external collaborations include: partnering with Moongate on July 6, allowing users to log in to Raydium via Apple, Google, or Ethereum accounts. On July 12, a partnership with fiat payment gateway Moonpay enabled users to purchase cryptocurrencies through traditional payment methods.
In conclusion, Messari believes that Raydium’s current trading volume levels will be maintained. Various upgrades and collaborations have enhanced user experience, and profit-sharing models like Burn & Earn and Blink have also increased its competitiveness.