Abracadabra has rolled out emergency measures after Magic Internet Money, or MIM, broke away from its $1 peg again and traded near $0.50 in the latest market update. The protocol said it was "acutely aware" of the depeg and would move to reduce the amount of MIM circulating in the market. Its first response was broad: interest rates were raised across all Cauldron lending markets, including older ones that have already been deprecated.
Cauldrons are the protocol’s lending venues where users post collateral and borrow MIM. By increasing rates, Abracadabra is making open debt more expensive to carry. That changes borrower incentives fast. The protocol has not given a fixed end date for the emergency settings, which means the policy could stay in place until repayment activity and market conditions improve.
Discounted repayment becomes the main recovery channel
Abracadabra is leaning on the depeg itself as part of the repair mechanism. When MIM trades well below face value, borrowers can buy it more cheaply on the open market and repay debt at par. In practice, that lowers the cost of closing positions for borrowers while removing MIM from debt balances, cutting supply at the same time.
The team described this as a “natural incentive” created by the market discount. It also said direct incentives and Curve bribes would be paused until MIM returns to its peg. That is a clear change in approach: rather than spending to support liquidity growth, the protocol is now concentrating on debt reduction and supply control.
Curve pool pressure remains a weak point
MIM’s peg depends on collateral backing, borrower behavior, and healthy liquidity in trading pools. Curve is one of its main venues, and stablecoin pools there need balanced liquidity to absorb swaps without large price moves. If liquidity thins out or becomes lopsided, selling pressure can push the token farther away from its target.
Earlier in June, Abracadabra added $100,000 worth of MIM, USDT, and USDC to a new Curve liquidity pool. At the time, the team said the move was meant to restore pool balance after withdrawals tied to changes in DeFi incentives. The latest emergency rate action shows that the earlier liquidity step did not fully contain pressure on the peg.
Crypto market weakness adds strain to the recovery effort
The latest MIM break came during a broader market downturn. According to the report, Bitcoin fell below $60,000 for the second time in June and triggered more than $850 million in liquidations. In that setting, stress can spread more quickly across stablecoin pools and leveraged debt positions.
The protocol is also operating under renewed scrutiny after an earlier security incident. The report referenced an October 2025 exploit in which attackers drained about $1.8 million from Cauldrons through a logic flaw. That case was separate from the current depeg, but it kept attention on Abracadabra’s risk controls. For now, the protocol says its priority is to restore confidence, improve market structure, and bring MIM back to a healthier peg, while it reviews additional recovery plans. Traders are likely to keep watching debt closures, pool balances, and price spreads across venues.