Abracadabra waves the wand: MIM stablecoin slips to 49¢ as protocol hikes rates to fight the spell 🪄

Decentralized finance lending platform Abracadabra said Wednesday it launched emergency measures after its crypto-collateralized stablecoin, Magic Internet Money (MIM), fell 50% below its $1 peg. "We're acutely aware of the MIM depeg and are taking emergency actions to remedy the situation," the team said on Wednesday, adding that effective immediately it will begin gradually "increasing interest rates across all Cauldrons, including deprecated markets, to encourage debt repayment and reduce the outstanding MIM supply." The protocol described itself as an omnichain DeFi lending platform that uses interest-bearing tokens as collateral to mint MIM, a dollar-pegged stablecoin that launched in May 2021.

According to CoinMarketCap data cited in the announcement, MIM's troubles began in mid-June when it slipped to 74 cents, briefly recovered to 89 cents, then plunged to 49 cents on Wednesday. The circulating supply of MIM is approximately $104 million. "The current depeg creates a natural incentive for borrowers to repay debt at a discount, accelerating supply contraction and strengthening the path back to the peg," the team said. "Our priority is simple: restore confidence, improve market structure, and return MIM to a healthy (and liquid) peg."

Abracadabra mints MIM through borrowing pools called "Cauldrons," which rely on crypto collateral and deep liquidity pools, primarily on Curve Finance, to maintain the dollar peg. On June 15, less than ten days before Wednesday's announcement, the protocol injected $100,000 into its primary liquidity pool on Curve Finance after the stablecoin first slipped from its peg. "This will serve as a base for liquidity to restore balance across Curve Pools after unexpected liquidity withdrawals due to recent DeFi incentive strategy changes," it said at the time.

By raising Cauldron interest rates, Abracadabra is making it more expensive for borrowers to maintain positions, encouraging repayment that burns MIM, contracts supply and is intended to help restore the peg. The broader crypto market has fallen about 3%, or roughly $60 billion, in the past 24 hours, with Bitcoin briefly dropping below $60,000, conditions the announcement implicitly cited as contributing to thin and imbalanced liquidity on decentralized exchanges.