Abracadabra Raises Borrowing Costs and Halts Rewards as MIM Recovers From a 51% Price Crash
Abracadabra has rolled out emergency measures after its Magic Internet Money (MIM) stablecoin suffered a sharp drop and lost its dollar peg. The DeFi lending platform is now taking several steps to bring the token back toward its intended value of $1.
The trouble started earlier this month when the MIM stablecoin slipped to around $0.74. Although the token briefly recovered and traded close to $0.89, the improvement did not last. Selling pressure increased across the market, pushing MIM down to nearly $0.49.
Abracadabra Launches Emergency Recovery Plan
In response, Abracadabra announced a recovery plan focused on reducing the amount of MIM in circulation. The protocol is increasing interest rates across all of its lending markets, including older markets that are no longer active.
Higher borrowing costs make it more expensive for users to keep loans open. As a result, many borrowers may choose to repay their debt instead. Since MIM currently trades below $1, borrowers can buy the stablecoin at a discount and use it to repay loans at full value.
This process removes MIM from circulation and helps reduce excess supply. Abracadabra believes this is one of the fastest ways to support the stablecoin and move it closer to its dollar peg.
The platform has also paused several reward programs and Curve Finance incentives. The decision allows the team to focus completely on stabilizing the stablecoin instead of encouraging growth.
Previous Efforts Failed to Stop the Decline
This is not the first attempt to support MIM. On June 15, Abracadabra added $100,000 to its main Curve Finance liquidity pool after large withdrawals affected liquidity. The move helped for a short period, but it failed to stop the stablecoin from falling further.
MIM launched in 2021 as a crypto-backed stablecoin. Users can mint the token by depositing cryptocurrency assets as collateral through Abracadabra’s DeFi lending platform. Unlike stablecoins backed by cash reserves, MIM relies on crypto collateral to maintain its value.
The recent decline happened during a broader crypto market slowdown. Falling prices across major cryptocurrencies created uncertainty and reduced liquidity in many DeFi markets. These conditions added more pressure on MIM and made the depeg worse.
Signs of Recovery Begin to Emerge
Despite the setback, early signs of recovery have appeared. After Abracadabra announced its emergency plan, MIM climbed back toward $0.95. The rebound suggests that the market has reacted positively to the stabilization efforts.
Investors will continue watching the situation closely in the coming days. The success of the recovery plan will depend on whether Abracadabra can reduce supply, improve liquidity, and restore confidence in the MIM stablecoin.
The MIM crisis shows that even crypto-backed stablecoins can struggle when market confidence weakens. Strong liquidity remains important for maintaining stable prices, especially during periods of heavy selling across the crypto market.
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