Abracadabra Proposes Liquidating MIM Stablecoin After Severe Collateralization Issues

The Abracadabra crypto protocol team has proposed liquidating the dollar-pegged stablecoin MIM following a series of hacks that severely compromised its collateralization, leaving it below 4%. The team cited issues such as users holding collateral without debt and assets that are nearly impossible to recover, including approximately $300,000 locked in the Arbitrum network.

According to the team's analysis, the total collateral for MIM stands at about $1.2 million, with only around $900,000 being truly liquid. Nearly $22 million in MIM is held outside protocol addresses, with Abracadabra estimating about $21 million as unsecured debt. This results in an actual token coverage of less than $0.04 per MIM, far below its intended peg to the US dollar.

The team considered raising interest rates to forcibly liquidate positions and restore MIM’s peg, but this option was rejected. Such a mechanism would likely only provide a short-term price spike, benefiting the fastest sellers while leaving most holders with little to no value. On September 30, MIM was trading at approximately $0.03, reflecting its severe devaluation.

If the liquidation proposal is approved, borrowers will receive the value of their collateral minus their debt in MIM, with debt counted at $1 per stablecoin. MIM holders are expected to receive a proportional share of the remaining funds, estimated at about $0.04 per MIM. Unclaimed funds after six months will be distributed among MIM holders. Once liquidation begins, Abracadabra will halt all protocol operations.