Abracadabra has launched a series of emergency measures after its Magic Internet Money (MIM) stablecoin lost its dollar peg and plunged well below its intended $1 value. The decentralized finance protocol said it is taking immediate action to reduce MIM supply and stabilize the market.
The team announced that borrowing costs will increase across all of its lending markets, known as Cauldrons, including older and inactive markets. The move is designed to encourage borrowers to repay outstanding debt and help remove MIM from circulation.
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
Why is Abracadabra raising interest rates?
According to the protocol, higher interest rates will make it more expensive for users to keep debt open. As a result, borrowers may be more likely to buy discounted MIM from the market and use it to repay loans.
Because debt repayments reduce the amount of MIM tied to lending positions, the strategy is intended to shrink overall supply and ease pressure on the stablecoin’s price.
Abracadabra said the emergency rate increases apply to both active and deprecated Cauldrons, ensuring that older debt positions also contribute to the recovery effort. The protocol has not provided a timeline for when the temporary measures could be lifted. In 2025, Abracadabra faced a security incident involving its gmCauldrons, resulting in a loss of about 13 million MIM.
Is repayments over rewards a new recovery strategy?
The protocol is now prioritizing debt repayment over liquidity incentives. Abracadabra confirmed that direct incentive programs and Curve-related bribes will be suspended until MIM returns closer to its peg.
The decision shows a change in strategy as the team focuses on reducing circulating supply rather than encouraging additional liquidity activity. Abracadabra argued that the current market discount creates a natural incentive for borrowers, as MIM can be purchased below face value and used to repay debt at full value.
By making debt cheaper to close and more expensive to maintain, the protocol hopes to accelerate supply contraction and support price recovery.
Can liquidity conditions help restore the peg?
The stablecoin depends heavily on balanced liquidity pools, particularly on Curve, where large sell orders can push prices lower when liquidity becomes thin or uneven.
Earlier this month, Abracadabra added $100,000 worth of MIM, USDT, and USDC to a new Curve pool to improve liquidity conditions. However, the latest depeg suggests that the measure was not enough to restore market stability.
At the time of the latest update, MIM was trading near $0.50, highlighting the scale of the challenge facing the protocol. Abracadabra said it is reviewing additional recovery measures and will provide further updates as plans are finalized.
For now, market participants are closely watching debt repayments, liquidity pool balances and MIM’s price performance as the protocol works to restore confidence and bring the stablecoin back toward its dollar peg.
Enjoyed this? Bookmark DeFi Planet, explore related topics, and follow us on Twitter, LinkedIn, Facebook, Instagram, Threads and CoinMarketCap Community for seamless access to high-quality industry insights
Take control of your crypto portfolio with DEFI PLANET PRO, DeFi Planet’s suite of analytics
