Abracadabra Hikes Rates Across Cauldrons as MIM Depeg Deepens to $0.50
A stablecoin trading at half its target price is stable in name only. Magic Internet Money (MIM), the U.S. dollar-pegged token issued by DeFi lending protocol Abracadabra.money, slid to about $0.50 — down roughly 36% over 24 hours.
Abracadabra's countermeasure: raise interest rates across every Cauldron vault, including deprecated markets, to push borrowers to repay and reduce MIM circulating supply.
How the mechanism works
Users mint MIM by depositing collateral into Abracadabra's lending vaults, known as Cauldrons. When MIM trades below $1, borrowers can buy the token at a discount on the open market and repay their debt at face value, keeping the spread. Higher interest rates increase the carrying cost of outstanding MIM debt, incentivizing borrowers to close positions by purchasing discounted MIM — creating additional buy pressure while shrinking supply.
The protocol also paused direct incentives and Curve bribes until MIM returns to its peg, shifting resources from ecosystem growth to peg restoration.
What led to the latest slide
Stress surfaced earlier this month. On June 15, MIM traded around $0.82, an 18% depeg that prompted a $100,000 liquidity injection into the main MIM Curve pool. On June 18, Abracadabra introduced a liquidity incentive campaign, allocating 140 million SPELL tokens to bolster pool depth. The measures failed to stabilize the peg, and the selloff intensified, culminating in the move to $0.50 and prompting emergency actions beginning June 24.
Recurring instability
This is not MIM's first major episode. A January 2024 smart contract exploit drained about $6.5 million from the protocol. A separate 2025 exploit led to roughly $1.7 million in losses. Both incidents coincided with depegging events.
Implications for DeFi investors
The near-term concern is spillover through liquidity pools. MIM is paired with other stablecoins in Curve Finance pools; a prolonged depeg can skew pool balances, leaving liquidity providers holding an outsized share of the depegged asset.
For traders who borrowed MIM against collateral, the trade-off shifts. Rising rates add urgency, while the discounted token price creates an opening: borrowers with collateral in a Cauldron can effectively repay debt at roughly 50 cents on the dollar by buying MIM on the open market.
