Magic Internet Money (MIM), a stablecoin from the decentralized lending protocol Abracadabra, has dropped almost 50% below its $1 target. This forced Abracadabra to take emergency steps to restore confidence. MIM briefly fell to about $0.43 before recovering to nearly $0.50, even as Abracadabra raised borrowing costs, stopped liquidity incentives, and urged borrowers to repay debt.
This sharp drop highlights the challenges crypto-collateralized stablecoins face, where keeping enough market liquidity is just as important as having enough collateral.
The latest volatility unfolded after MIM came under heavy selling pressure amid broader weakness across the crypto market. According to market data, the stablecoin traded between $0.43 and $0.73 over the past 24 hours, while its trading volume remained relatively thin, making it harder for buyers to absorb selling pressure.
MIM is created through Abracadabra’s decentralized lending platform, where users deposit yield-bearing crypto assets as collateral and borrow newly minted MIM. Although the system remains over-collateralized, the stablecoin’s market value ultimately depends on healthy liquidity across decentralized exchanges.
To address the crisis, Abracadabra announced emergency steps to reduce the amount of MIM in circulation. The protocol will slowly raise interest rates across all its lending markets, called Cauldrons, including older and outdated pools.
The higher borrowing costs are meant to encourage users to repay their loans. Since MIM is trading well below $1, borrowers can buy cheaper tokens from the market and repay their debt at full value, which reduces the total supply. Abracadabra hopes this will slowly help bring the stablecoin back to its $1 peg.
The protocol has also suspended liquidity incentives and Curve Finance reward programmes, shifting its immediate focus from attracting liquidity providers to shrinking supply and rebuilding confidence.
These measures follow an earlier attempt to stabilize the peg. On June 15, Abracadabra injected $100,000 into Curve Finance liquidity pools after MIM first began slipping below $1. However, the additional liquidity failed to stop the decline, suggesting that broader market sentiment had overwhelmed the intervention.
This incident highlights a common problem with crypto-collateralized stablecoins. Even if there is enough collateral, low liquidity and falling market confidence can cause sharp price drops that are hard to fix. Low trading volumes can create a cycle where falling prices lead to more selling and fewer new buyers.
Abracadabra says it is looking at more ways to help MIM recover and is committed to restoring its $1 peg. For now, the stablecoin’s recovery will mostly depend on borrowers repaying loans, better liquidity, and renewed confidence from DeFi users.
We’re acutely aware of the $MIM depeg and are taking emergency actions to remedy the situation.
Effective immediately, we will begin gradually increasing interest rates across all Cauldrons, including deprecated markets, to encourage debt repayment and reduce outstanding $MIM…
— 🧙🏼♂️ (@MIM_Spell) June 24, 2026
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