Abracadabra proposes closing its MIM stablecoin at about four cents on the dollar

MIM was designed to have a floor under its price. Users post yield-bearing crypto as collateral and mint MIM against it ^[8], and Crypto Briefing describes the token as overcollateralized ^[1]. Cauldron loans are denominated in MIM ^[4], so a borrower should be able to buy MIM below $1 and retire debt at a discount, and that buying should lift the price. A settlement at about four cents ^[10] says the floor either was never there or has been used up.

The settlement price has more than one explanation. One possibility is that the bad debt left by the January 2024 exploit ^[9] was never fully cleared, leaving MIM short of full backing before June. Crypto Briefing's explanation is that collateral lost value in the downturn at the same moment demand for MIM dried up ^[12]. It is also possible that the collateral is still worth more than the float. In that case, settling outstanding debts at a fraction of face value ^[2] would let borrowers reclaim it for pennies while holders take the loss. The proposal as reported does not state how much collateral the Cauldrons still hold.

The price moved in two legs. MIM fell by about a third in June, from around $0.74 to roughly $0.50, as Bitcoin dropped below $60,000 ^[3][6]. It then lost a further 91% on the way to $0.0446 by September ^[1][1]. Between the two, Abracadabra raised Cauldron rates and stopped paying Curve bribes ^[4][5]. Crypto Briefing argues that such moves signal distress and push more holders to leave ^[11].

Abracadabra spent little on the peg directly. Its one reported intervention was roughly $100,000 put into a Curve pool in mid-June ^[6]. At $1, a circulating supply of 55 million to 104 million tokens ^[7] is $55 million to $104 million of face value ^[2], so the injection covered 0.10% to 0.18% of what holders had been promised ^[3].

The supply range also sets the size of the loss. Dividing the self-reported $4.63 million market cap by $0.0446 gives about 103.8 million tokens ^[4], near the top of the range. On that count holders would receive about $4.6 million against $104 million of face value, a shortfall of about $99.4 million. On the low count of 55 million tokens they would get about $2.5 million and lose about $52.5 million ^[5].

Crypto Briefing presents MIM as further evidence that decentralized stablecoins are fragile, a slow loss of confidence that compounded over months ^[13]. I'd draw a narrower conclusion. A protocol still carrying bad debt from 2024 ^[9] may have been undercollateralized well before the June slide, and then the failure belongs to one protocol's balance sheet more than to the overcollateralized model. The counter-case is strong: collateral and demand fell together ^[12], and higher rates did not stop the slide ^[4][1]. The collateral figure settles it. If the Cauldrons hold collateral worth well above the roughly $4.6 million at which the float trades ^[5], a four-cent settlement would move that surplus from holders to borrowers.