MIM stablecoin plunges 50% to $0.49 as Abracadabra raises rates

Magic Internet Money lost half its value in a depeg that laid bare the fragility of crypto-backed stablecoins in thin liquidity markets.

Magic Internet Money, the stablecoin minted on the Abracadabra lending protocol, fell 50% to $0.49 on June 24, pushing the team to raise interest rates across all Cauldrons to encourage debt repayment and shrink the outstanding supply.

"We're acutely aware of the MIM depeg and are taking emergency actions to remedy the situation," the Abracadabra team said on June 24, announcing it would begin gradually increasing interest rates across all Cauldrons, including deprecated markets, to encourage debt repayment and reduce the outstanding MIM supply.

MIM's troubles began in mid-June, when it slipped to $0.74 before a brief recovery to $0.89, then plunged to $0.49 on Wednesday, according to CoinMarketCap. The current circulating supply is about $104 million. The protocol had injected $100,000 into its primary liquidity pool on Curve Finance on June 15, when 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.

The 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. 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. "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.

MIM is minted by borrowing against yield-bearing tokens in Abracadabra's Cauldrons, but it relies on crypto collateral and deep liquidity pools, primarily on Curve Finance, to maintain its $1 peg. Thin and imbalanced liquidity in decentralized exchange pools is fueling selling pressure that makes the stablecoin vulnerable to further depegging, potentially amplified by broader market caution. The broader crypto market fell about 3%, or roughly $60 billion, in the past 24 hours, with Bitcoin briefly dropping below $60,000.

The 50% depeg of MIM undermines confidence in DeFi stablecoins and overcollateralized lending protocols. It could trigger cascading liquidations across Abracadabra's Cauldrons and amplify broader market selling pressure. The $104 million circulating supply and reliance on Curve Finance pools create systemic risk within DeFi, particularly as the sector's total value locked has already dropped 39% in 2026 amid a market downturn and record hack activity.

This article is for informational purposes only and does not constitute investment advice.