Abracadabra comes with peg stabilizing mechanisms after rumors about bad debt broke its peg. The platform has hiked the interest rates in the yvDAi cauldron from 0% to 1%, and Stargate USDC and USDT are likely to follow depending on how the peg reacts. Users are requested to de-leverage their positions from the yvDAi cauldron due to its sluggishness.
Following the depegging incident that destroyed the long-built ecosystem of Terra, several other platforms have fallen prey to the same fate. Abracadabra joins this list thanks to a Twitter thread that called out the bad-debt rumors of the platform. Soon Abaracadabra’s stablecoin Magic Internet Money (MIM) lost its peg and sank close to $0.90.
The Twitter thread shared by Autism Capital on June 18 claimed that MIM was “insolvent.” The post also stated that this stablecoin, with a market cap of $300 million, created about $12 million in bad debt last month when Terra was going down. The news was swept under the rug conveniently without anyone noticing.
But what’s more, an image from March 25 showing mortgaged assets from the MIM dashboard claimed that nearly 64% of stablecoin collaterals are in UST. The Abracadabra team, however, denied the claims saying the data was erroneous. On top of that, the page remains inaccessible to users.
Stablecoins usually have a bot backup at times like this to stabilize the liquidation level. These bots take the loans of users back to MIM and help get the collateral position back. But, given the speed at which UST fell, the bots were of no use to the MIM stablecoin. Now, after over a month, the ripples of Terra’s keep haunting MIM as it has lost the peg and is slowly going down.
The Abracadabra team has now shared that they have come up with a solution for this issue thanks to the new v3 cauldrons they developed in the last few months. These will be added to the lineup to stabilize the peg of MIM. The CDPs are designed to act as peg stabilizers thanks to the variable interest rates that get turned on during extreme market conditions.
The yvDAi cauldron’s yearly interest rate will increase to 1% and continue for the next few days. As users are asked to close their open positions in the cauldron, the UI may show a lower value than expected. In that case, the difference between their position and the amount can be found in Degenbox and transferred to the wallet after some time.
Closing positions when MIM trades below the one-dollar line will result in quick profit for the users. On the other hand, users will buy MIM cheaply to help MIM obtain its peg. The increasing interest rates will result in more MIM getting out of the MIM-3pools balancing 3crvs and MIM.