Abracadabra’s MIM stablecoin took a major hit on June 12, falling as low as $0.87 across multiple chains. The dollar-pegged token’s decline adds to a growing list of algorithmic stablecoins that have failed to maintain their $1 target when liquidity has dried up.
Blockchain security company Blockaid reported the depeg on Arbitrum. MIM would trade between $0.91 and $0.92 on executable routes. Blockaid attributed the price drop to low and unbalanced liquidity in Arbitrum pools. The on-chain data wasn’t much better, with MIM changing hands between $0.871 and $0.874 between chains, an 11% drop in 24 hours.
This is not the first algorithmic stablecoin to break its peg
MIM is not the first algorithmic stablecoin to break under liquidity stress, and history suggests it will not be the last. Ethena’s $USDe, the third-largest stablecoin by market capitalization, crashed to $0.65 on Binance in October 2025 after a market-wide sell-off triggered massive liquidations. More than $19 billion in leveraged crypto positions were wiped out in less than 24 hours during this event, according to Cryptopolitan reporting at the time. Ethena Labs later said that $USDe remained over-collateralized throughout, and Binance confirmed that the price dislocation came from its platform and not the issuer. Following this incident, Ethena proposed a buyback mechanism to deploy up to $95 million, or approximately 1.2% of supporting assets, to purchase US dollars at a discount when the token trades below $0.99 on secondary markets.
In December 2025, another algorithmic stablecoin, Solstice Finance’s USX, crashed to $0.10 on Solana before liquidity injections brought it back towards parity. Solstice blamed the secondary market liquidity flight and said primary market redemptions continued to operate normally. The token returned to $0.998 after the intervention.
Low liquidity is the main cause
A common theme in these events is the low liquidity of the secondary market. Algorithmic stablecoins rely on smart contract mechanisms and arbitrage incentives instead of direct fiat reserves like USDT and USDC. This makes them more likely to disengage when liquidity dwindles.
MIM is the native stablecoin of Abracadabra, a DeFi lending protocol that allows users to borrow against yield-producing collateral. The protocol announced in March 2026 the construction of “Abracadabra V2”, described as an evolution towards a private banking experience.
The Abracadabra team published a governance proposal on X to add a MIM-2Pool gauge on Curve Finance in order to increase MIM’s on-chain liquidity. This proposal was submitted on June 11, just a day before the Depeg incident. If it passes the seven-day governance vote, the pool will become eligible for $CRV issuance.
What happens next
Traders holding MIM positions on Arbitrum or other chains are closely monitoring liquidity conditions, wondering whether the token will stabilize or deteriorate further. The Curve governance vote on the MIM-2Pool gauge closes in approximately six days. If approved, $CRV issuances could attract new liquidity providers, but this schedule does nothing to close the current deficit. For now, MIM holders are waiting.
