Abracadabra announced emergency measures after MIM stablecoin fell to $0.50 from its $1 peg

Decentralized finance protocol Abracadabra has announced a set of emergency actions after its stablecoin, Magic Internet Money (MIM), lost its US dollar peg and fell significantly below its target value of $1. The protocol stated that its top priority is to reduce the circulating supply of MIM and restore balance to the market.

Borrowing costs raised sharply

The Abracadabra team stated that it would increase borrowing costs across all its lending markets, known as “Cauldrons.” This action applies not only to current and active markets but also to older, retired lending pools. The goal is to encourage users to close outstanding loans and thereby decrease the total amount of MIM in circulation.

According to the protocol, higher interest rates make keeping open loans more expensive. This, in turn, could push borrowers to purchase discounted MIM on the market to pay off their debts. As a result, the amount of MIM tied to open borrowing positions is expected to decline, easing some of the supply-side pressure.

The protocol did not specify an end date for these temporary measures. Abracadabra, which suffered a security incident linked to gmCauldrons in 2025 resulting in a $13 million MIM loss, is recognized as a DeFi project specializing in collateralized lending markets and stablecoin operations.

Mini glossary: In the Abracadabra ecosystem, a “Cauldron” refers to a lending market where users can supply collateral to borrow funds. “Curve” is a decentralized liquidity protocol used extensively for trading stable assets and is considered critical for maintaining price stability in liquidity pools.

Liquidity incentives suspended

The protocol also confirmed it would shift focus away from liquidity incentives toward debt repayment during the recovery process. Direct incentive programs and reward payments associated with Curve have been suspended temporarily. Abracadabra stated that this policy will remain in effect until MIM approaches its dollar peg again.

This marks a significant change in the team’s strategy. Previously, supporting market liquidity was prioritized; now, reducing the circulating supply of MIM is at the forefront. The team argues that the market price of MIM trading below its nominal value creates a natural incentive for borrowers to repay their loans.

Liquidity support proves insufficient

MIM’s price stability depends heavily on well-balanced liquidity pools on Curve. When liquidity becomes weak or imbalanced, large sell orders can place increased downward pressure on the price.

Earlier this month, Abracadabra added $100,000 worth of MIM, USDT, and USDC to a new Curve pool in a bid to strengthen liquidity conditions. However, the most recent depegging event showed that this measure was not enough to restore price stability.

At the time of the latest update, MIM was trading around $0.50, illustrating the magnitude of the challenge facing the protocol. Abracadabra noted it is evaluating further recovery options and will provide additional information as plans are finalized.

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