Abracadabra Hikes Borrowing Costs as MIM Stablecoin Depeg Surpasses 50%

Abracadabra's Magic Internet Money (MIM) stablecoin has depegged by over 50% from its $1 peg, prompting emergency measures to stabilize it. The protocol is increasing borrowing costs across its lending system to encourage repayments and reduce the outstanding supply of MIM.

Abracadabra acknowledged the depeg and stated that the response would begin immediately. The plan involves gradually raising interest rates across its 'Cauldrons', including deprecated markets, to accelerate debt repayment and contract MIM circulation.

The protocol relies on sufficient liquidity in DeFi markets to maintain its peg stability, but thin liquidity can worsen depegs. Abracadabra attempted a prior liquidity injection into Curve Finance to support peg stability, but the stablecoin still depegged further.