A new stablecoin in turmoil – Last month, stablecoins made headlines after the fall of the Terra Luna MTS. However, this would not be the only one to be the victim of the loss of his stallion. Therefore, the Abracadabra protocol stablecoin MIM has just lost its anchor as well.
MIM: a complex algorithmic stablecoin
MI M. Where is it Magic money on the Internet is an algorithmic stablecoin issued by the Abracadabra.money protocol.
In practice, the MIM tokens are issued by the protocol collateralising other so-called tokens fruitful. These interest-bearing tokens are tokens that represent deposits on various DeFi protocols.
For example, yvUSDT represents a USDT deposit on the Yearn Finance protocol. Therefore, the tokenized version of this deposit, yvUSDT, can be guaranteed to issue MIM tokens.
An operation that adds another layer of complexity compared to algorithmic stablecoins such as DAI. Indeed, FAI is issued through the collateralisation of more traditional assets such as ETH or USDC.
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MIM and Abracadabra.money on the verge of collapse
As we have seen with the fall of the FSO, algorithmic stablecoins can prove extremely fragile. This phenomenon is exacerbated in the context of a bear market.
Furthermore, this phenomenon can be exacerbated by a mismanagement by the founders of these stablecoins. According to revelations published by Capital of autism on Twitter, the Abracadabra.money’s MIM may very well be on its way to joining UST in the abyss.
Then on June 18, Autism Capital posted a thread announcing it “MIM (Magic Internet Money) could be insolvent”. The details provided are chilling and could cost stablecoin owners dearly.
So, last month, during the fall of the UST stablecoin, $ 12 million in bad debt was created on the Abracadabra.money protocolbecause the liquidation process was not started in good time.
In practice, this means that the value of the collateral used to secure these $ 12 million has fallen below the issued value in MIM tokens. According to Autism Capital, this news “was blown away” by the founders of Abracadabra.money.
To hide this disastrous situation, the founders offline the dashboard allowing to follow the health status of the loans on the protocol. The latter passed off this maneuver as an “update” of the aforementioned dashboard.
“With the dashboard down, there is no easy way to check the amount of bad debt in the protocol. “
The MIM stablecoin moves away from its anchor
Rather than attempting to resolve this situation by strengthening the treasures of the protocol, Daniele Sesta, the founder of MIM took the point home. Thus, it has created more bad debts leaving a position of $ 125,000 in SPELL to liquidate by reselling the generated MIMs. Therefore, the founder himself added $ 125,000 of unsecured debt.
A situation that doesn’t seem to bother him. Indeed, this stated about the Protocol Discord: “The idea that I’m not paying off this bad debt is funny”.
Also, instead of using the protocol treasury to buy back the MIMs and destroy them to restore the peg, the teams behind the project preferred to buy CRVs with no real explanation.
Obviously, the MIM stablecoin reacted very badly to this situation by moving away from its rung. So, this one has it fell to $ 0.91or 9% below its dollar benchmark.
This downfall could continue if nothing is done to cover bad debt under the protocol.
MIM isn’t the only algorithmic stablecoin in turmoil. Indeed, the USDD of the Tron network is also facing a depeg situation. Its founder Justin Sun somehow tries to get by by massively selling TRX to keep the peg.
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