Abracadabra takes emergency action as MIM stablecoin depeg worsens

The protocol is raising interest rates across all Cauldrons to encourage debt repayment and reduce supply.

Decentralized finance platform Abracadabra said Wednesday that 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.

It said 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 MIM depeg is a stark reminder that even overcollateralized DeFi stablecoins can be fragile in thin-liquidity environments and bear markets, underscoring the persistent risks of crypto-backed money.

Abracadabra describes itself as an omnichain DeFi lending platform that utilizes interest-bearing tokens as collateral to mint MIM, a dollar-pegged stablecoin that launched in May 2021. 

MIM’s troubles began in mid-June, when it slipped to 74 cents before a brief recovery to 89 cents, then plunged to 49 cents on Wednesday, according to CoinMarketCap. The current circulating supply of MIM is about $104 million. 

MIM depeg exceeds 50%. Source: CoinMarketCap

“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.

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By raising Cauldron interest rates, the protocol makes it more expensive for borrowers to maintain positions, encouraging repayment that burns MIM, contracts supply and helps restore the peg.

It comes less than 10 days after Abracadabra injected $100,000 into its primary liquidity pool on Curve Finance on June 15, when the stablecoin first slipped from its peg.