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Abracadabra has started emergency measures after Magic Internet Money, its dollar-pegged stablecoin, fell to about 50 cents and moved further away from its $1 target.
The DeFi lending protocol said it will raise interest rates across its Cauldron markets to push borrowers toward repayment and reduce the amount of MIM in circulation.
All Cauldrons Face Higher Rates
Abracadabra said the rate increases will apply across all Cauldrons, including deprecated markets. Cauldrons are the protocol’s lending markets, where users deposit collateral and borrow MIM.
The move changes the economics for borrowers with open debt. Higher rates make it more expensive to keep positions open, while the depeg lets borrowers buy MIM below $1 and use it to repay debt at face value.
Discounted Repayments Could Shrink Supply
The protocol is trying to use discounted MIM repayments to reduce circulating supply. If more borrowers repay debt, MIM is removed from the system and the outstanding supply contracts.
That mechanism is central to Abracadabra’s response, because MIM is issued through borrowing rather than through a fiat reserve model.
Incentives Pause Until MIM Repegs
Abracadabra also paused direct incentives and Curve bribes until MIM returns to its peg. That shifts the protocol away from liquidity growth and toward debt repayment.
The team said it is assessing other recovery options and will release updates when those plans are ready. It has not given a fixed timeline for the rate increases or for restoring the peg.
Earlier Curve Support Used $100K
The emergency step follows earlier support for MIM liquidity. Abracadabra previously injected $100,000 into a Curve pool and later moved to support pool depth with SPELL incentives.
Those steps were meant to improve liquidity, but the latest depeg shows the pressure has continued.
MIM Fell Near $0.50 in June
MIM had already been under pressure before the latest drop. The stablecoin slipped below peg earlier in June as thin liquidity made large exits harder to absorb.
The latest move pushed the token near half of its intended value, with market trackers showing MIM around $0.49 to $0.50 after the emergency announcement. That leaves Abracadabra trying to repair liquidity and confidence at the same time.
Collateralized Borrowing Drives MIM Supply
MIM is issued through Abracadabra’s lending system rather than through a fiat reserve model. Users mint the stablecoin by borrowing against crypto collateral. The model can regain balance if repayments shrink supply and liquidity improves.
The next update will be whether higher borrower rates reduce enough MIM supply to help the token move back toward its peg.
