A stablecoin trading at half its intended value is, by definition, not very stable. Magic Internet Money, the dollar-pegged token issued by DeFi lending protocol Abracadabra.money, plunged to approximately $0.50, marking a decline of roughly 36% in just 24 hours.
The protocol’s response: crank up interest rates across every single Cauldron, including deprecated markets, to pressure borrowers into repaying their debts and pulling MIM out of circulation.
What Abracadabra is actually doing
Borrowers mint new MIM tokens by depositing collateral into Abracadabra’s lending vaults, called Cauldrons. When the stablecoin trades below $1, those borrowers can theoretically buy MIM at a discount on the open market and use it to repay their debt at face value, pocketing the difference. By raising interest rates, Abracadabra is making the cost of holding outstanding MIM debt increasingly painful, creating pressure for rational borrowers to close positions by buying discounted MIM, which in turn creates buying pressure and contracts supply.
The protocol also suspended direct incentives and Curve bribes until MIM returns to its peg, redirecting every resource toward restoring the peg rather than growing the ecosystem.
