Abracadabra.money declared emergency measures after its MIM stablecoin fell roughly 50% below its $1 peg, triggering interest rate hikes across all Cauldrons, a halt to Curve bribes, and a suspension of direct incentives.
Abracadabra.money declared emergency measures Wednesday after its dollar-pegged stablecoin Magic Internet Money (MIM) fell roughly 50% below its $1 target. MIM was trading around $0.48 Thursday, its worst sustained depeg on record.
“We’re acutely aware of the $MIM depeg and are taking emergency actions to remedy the situation,” the team posted on X.
The protocol said it would “gradually increase interest rates across all Cauldrons, including deprecated markets, to encourage debt repayment and reduce outstanding $MIM supply.”
It halted direct incentives and paused Curve bribes entirely until the peg recovers.
“The current depeg creates a natural incentive for borrowers to repay debt at a discount, accelerating supply contraction and strengthening the path back to peg,” the team wrote. “Our priority is simple: restore confidence, improve market structure, and return $MIM to a healthy (and liquid) peg.”
TVL and Price Drop
MIM’s circulating supply stands at roughly 55.6 million tokens. At current prices, that gives the stablecoin a market cap near $26.8 million, per CoinGecko. Total value locked across Abracadabra’s protocol has fallen to $5.11 million, split between Arbitrum ($2.71 million, 53%) and Ethereum ($2.14 million, 42%), per DefiLlama. The MIM token is down by more than 60% from its all-time high.
Collateralized Debt
Abracadabra is a collateralized debt protocol. Users deposit interest-bearing tokens as collateral into smart contracts called Cauldrons, borrow MIM against that collateral, and can deploy the borrowed stablecoin elsewhere.
The model resembles MakerDAO, but Abracadabra specifically accepts yield-generating assets as collateral, so deposits keep earning while locked. MIM’s peg depends on borrowers maintaining an incentive to repay their loans in MIM. When that repayment demand weakens and secondary-market liquidity thins, the stablecoin can slip below $1 without a hard backstop to restore it.
Months in the Making
The June 24 emergency did not arrive without warning. On June 14, Abracadabra acknowledged “unexpected liquidity withdrawals due recent DeFi incentive strategy changes” and said restoring MIM liquidity was “currently our highest operational priority.”
The team funded a new Curve pool with $100,000 from its balance sheet. On June 19 the protocol deployed 70 million SPELL tokens to incentivize MIM liquidity pools on Curve. Two days later, on June 21, it split a fresh 70 million SPELL batch between the MIM-3Pool and MIM-2Pool. Those efforts proved insufficient.
Compounding the liquidity crunch was Abracadabra’s own V1-to-V2 migration plan. In April, the protocol published an RFC that proposed raising borrowing rates across V1 Cauldrons over 30 to 60 days to consolidate MIM liquidity ahead of a V2 launch targeting a DeFi banking interface with cards and privacy features.
The intent was to push borrowers toward repaying existing loans. The side effect was a contraction of MIM demand at the same time liquidity providers were exiting Curve pools, leaving the stablecoin thin on both the supply and demand sides of the peg mechanism.
Not the First MIM Crisis
Abracadabra has navigated a major MIM crisis before. In January 2022, the protocol was exposed to the Terra/Luna collapse via its “Degenbox” strategy, which looped MIM into Anchor Protocol’s UST yield product. When UST depegged and the Terra ecosystem imploded, Abracadabra faced roughly $12 million in bad debt and MIM temporarily lost its peg before recovering. The protocol survived through collateral liquidations and treasury reserves.
Wednesday’s depeg is more severe in percentage terms. MIM’s all-time low is $0.2495. The stablecoin has now fallen more than 50% from $1 and touched near that floor. Whether the rate-hike mechanism can contract supply fast enough to matter depends on how many borrowers hold positions in Cauldrons with sufficient collateral value to repay.
Market Reaction
SPELL, Abracadabra’s governance token, fell roughly 5.5% on the day to about $0.0001, per CoinGecko. At that price, SPELL is down 99.7% from its all-time high of $0.0351 and carries a market cap near $17.5 million. With the protocol’s TVL at $5.11 million, SPELL’s market cap now exceeds the collateral value backing MIM by more than three times.
Abracadabra said “additional recovery initiatives are being evaluated and will be communicated as they are finalized,” without naming specific treasury actions, new collateral parameters, or a timeline for peg restoration.
