Key Takeaways
- Magic Internet Money stablecoin crashed to $0.49, falling over 50% below its dollar peg
- The protocol implemented higher interest rates on all Cauldrons to encourage debt repayment
- Curve liquidity bribes and rewards were suspended to prioritize supply contraction
- A previous $100,000 liquidity boost in June proved insufficient to maintain the peg
- Broader market volatility, including Bitcoin dropping under $60,000, intensified the crisis
The Magic Internet Money stablecoin from Abracadabra experienced a severe depegging event this week, plummeting to approximately $0.49. The development triggered immediate crisis response actions from the protocol on Wednesday as it attempts to restore the token to its intended $1 value.
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
The initial depeg began in mid-June when MIM declined to $0.74 before staging a temporary comeback to $0.89. However, the token then experienced a dramatic collapse to $0.49, based on CoinMarketCap data. The token’s circulating supply currently sits at approximately $104 million.
Emergency Response Measures
Abracadabra revealed plans to increase borrowing costs across its entire suite of Cauldrons. These Cauldrons function as the protocol’s lending infrastructure, allowing users to deposit collateral assets and mint MIM tokens.
By elevating interest rates, the protocol makes it financially burdensome to maintain outstanding debt positions. This strategy aims to incentivize borrowers to close their loans quickly, which destroys MIM tokens and decreases overall circulation.
These rate adjustments apply to both currently operating markets and legacy, phased-out Cauldrons. The protocol has not specified when these emergency interventions will conclude.
Additionally, Abracadabra announced it is halting Curve voting incentives and liquidity mining rewards until MIM regains its peg. This represents a departure from the protocol’s earlier approach of compensating liquidity providers.
Arbitrage Opportunity for Borrowers
The protocol highlighted that borrowers can now purchase MIM on secondary markets for less than $1, then utilize it to settle their debt at full dollar value. This arrangement provides a direct financial motivation to eliminate positions immediately.
The development team characterized this as an “organic incentive” driving borrower behavior. If sufficient loan repayments materialize, the MIM supply shrinks and alleviates stress on the peg.
On June 15th, Abracadabra deployed $100,000 worth of MIM, USDT, and USDC into a Curve liquidity pool. The intervention aimed to rebalance the pool following withdrawals connected to shifting DeFi reward structures.
That intervention proved temporary. The peg deteriorated again shortly afterward, this time with greater severity.
Liquidity Crisis at the Core
MIM’s stability mechanism relies heavily on well-balanced liquidity pools, primarily on Curve Finance, to maintain proximity to $1. When these pools become shallow or imbalanced, even modest selling pressure can trigger sharp price declines.
The wider cryptocurrency market also faced headwinds during this timeframe. Bitcoin fell beneath $60,000 for the second time in June, catalyzing over $850 million in forced liquidations market-wide.
The protocol also confronted a security breach in October 2025, when malicious actors extracted roughly $1.8 million from Cauldrons by exploiting a smart contract vulnerability. While unrelated to the current depeg, the incident maintained heightened scrutiny on the protocol.
The team stated its objective is to “rebuild trust, strengthen market infrastructure, and return MIM to a stable peg.” Additional recovery initiatives are under evaluation and will be communicated once approved.
The critical question now is whether borrowers will repay loans at sufficient volume. Successful debt reduction could contract supply and create a recovery pathway. Without adequate liquidity depth, MIM remains vulnerable to additional volatility.
