Abracadabra has launched emergency measures after Magic Internet Money, its dollar-denominated MIM stablecoin, slipped sharply below its $1 target.
Summary
- MIM’s slide of 50% pushed Abracadabra to an emergency rise in all active and withdrawn Cauldron markets.
- Borrowers now have a cheaper repayment window as Abracadabra tries to reduce the remaining MIM supply.
- Curve fixed bribes and allowances show that the protocol is changing from growth rewards to stability.
The DeFi lending protocol said it is “well aware” of depeg and will take action to reduce the amount of MIM in circulation.
The team said it will increase interest rates on all Cauldrons, including old markets that users no longer use. Cauldrons are Abracadabra lending marketplaces, where users post collateral and lend MIM. Higher rates make open credit more expensive, which can push borrowers to pay off sooner.
The rate system includes both live and withdrawn markets, so old credit positions are always part of the answer. Abracadabra has not set a fixed end date for the emergency changes.
Recovery becomes the main tool
Abracadabra has included a market discount as part of its recovery route. When MIM trades below $1, borrowers can buy the cheapest stablecoin on the market and use it to pay off debt at a nominal value. That charge burns or removes MIM from debt positions, reducing credit availability.
The protocol said the current depeg creates a “natural incentive” for borrowers to repay at a discount. It also said that the direct compensation and bribery of Curve will stop until MIM returns to its payment. That marks a shift from cash prizes to less focus on payouts and supply management.
Liquidity pressure hits Curve pools
MIM relies on collateral, loan activity and capital pools to stay close to $1. Its main trading areas include Curve pools, where stablecoins require limited capital to support exchanges. When liquidity becomes thin or one-sided, selling pressure can move the token further towards its target.
Abracadabra had already added $100,000 of MIM, USDT and USDC to the new Curve liquidity pool in early June. The team said at the time that the move aimed to restore the pool’s balance after withdrawals related to DeFi changes. The recent rate action shows that the previous monetary policy action did not fully stop the pressure on the peg.
Comprehensive stress and recovery assessment
Market data showed MIM near $0.50 during the last depeg update. The break came as crypto markets also weakened. As crypto.news reported, Bitcoin fell below $60,000 for the second time in June and caused the liquidation of more than $850 million.
The MIM crisis also follows a difficult stretch in the DeFi securities and lending markets. In a previous article, crypto.news discussed the Abracadabra exploit in October 2025, where attackers withdrew approximately $1.8 million from Cauldrons after exploiting a logical flaw. That event was different from the current depeg, but it kept the focus on the protocol’s risk controls.
Abracadabra said its priorities are to “restore confidence, improve market structure, and return MIM to a healthy footing.” The team also said it is reviewing other rescue plans and will share them once they are finalized. Currently, the plan focuses on making debt more expensive to hold and cheaper to pay off.
The next assessment will come from the borrower’s response and market capitalization. If payments rise, MIM supply may decrease and reduce pressure on the peg. If liquidity remains thin, the stablecoin may continue to experience sharp movements throughout the Curve and other trading areas.
Markets track loan closings, pool balances and price spreads closely.
