Abracadabra Rolls Out Emergency Steps to Shore Up MIM Stablecoin
Abracadabra, the DeFi lending protocol behind the Magic Internet Money (MIM) stablecoin, has introduced emergency measures after MIM suffered a sharp breakdown in its dollar peg.
The token at one point traded more than 50% below its intended $1 value. The team said it is moving quickly to stabilize the stablecoin and rebuild market confidence.
Its main tool is a phased increase in interest rates across all lending markets, known as Cauldrons, including older and deprecated markets. The goal is to push borrowers to repay loans and shrink MIM's circulating supply. Abracadabra argues the current market dislocation creates a built-in incentive: borrowers can buy discounted MIM and repay debt at face value, permanently removing tokens from circulation.
The protocol said reducing supply is among the most effective ways to help restore the peg. Higher borrowing costs are intended to encourage users to close out positions instead of maintaining leverage, improving the supply-demand balance. Abracadabra added that its near-term priorities are restoring confidence, improving market structure, and returning MIM to a liquid, healthy dollar peg.
MIM is a crypto-backed stablecoin launched in May 2021. Rather than holding cash or Treasury reserves, it is minted by depositing interest-bearing crypto assets as collateral through Abracadabra's lending platform. The protocol operates across multiple blockchains and lets users borrow MIM against crypto holdings while earning yield on collateral.
The latest depeg started in mid-June, when MIM slipped to about $0.74 and later rebounded briefly to around $0.89. Selling pressure then accelerated, driving the price down to roughly $0.49. At press time, MIM had recovered to about $0.95.
The current stress follows an earlier attempt to support liquidity. On June 15, shortly after MIM began trading below $1, Abracadabra injected $100,000 into its primary Curve Finance liquidity pool. The team said the move aimed to rebalance Curve pools after unexpected liquidity withdrawals tied to recent shifts in DeFi incentive strategies. The injection provided temporary support but did not prevent a deeper depeg.
Crypto-backed stablecoins are often viewed as more resilient than algorithmic models because they are overcollateralized, but they can still destabilize when liquidity thins, sentiment deteriorates, or large holders exit liquidity pools.
