Is MIM the Next Stablecoin in Trouble?

The crypto market is currently going through one of its worst moments in history. Since Luna’s crash in early May, there’s been a strong sense of fear over which project would go down next. Judging from recent reports, Magic Internet Money, or MIM, appears to be on a similar path as Luna.

MIM is a stablecoin soft-pegged to the U.S. dollar. DeFi lending platform Abracadabra.money mints the stablecoin. Abracadabra enables its users to convert interest-bearing cryptos into stablecoins. Word on the street is that the MIM stablecoin is the latest to de-peg amid the liquidity issues in the market. 

Based on alleged insider information, Autism Capital, an investment firm, revealed that MIM’s slip was due to excessive loans caused by Terra’s collapse. In a long Twitter thread, the platform noted that MIM had accrued about $12 million in bad debt. However, MIM founder Daniele Sestagalli strongly denied such claims. 

Other Twitter users confirmed rumors of MIM’s impending collapse, with one user claiming that the entire crypto market could go further down the drain if MIM is unable to reclaim its peg. He wrote, ”we are still unsure whether they will be able to pay off debt and re-peg MIM stablecoin. If they are still unable to recover the peg. This will have ramifications to the entire crypto market which will bring bitcoin price and crypto down further from where it is now.”

What’s Happening With MIM?

The de-pegging of the MIM token began at about 7:40 p.m. ET on June 17, and the token’s price dropped to $0.926 in only three hours. At the time of writing, this stablecoin was trading at the $0.98 mark. Most experts believe that Terra’s collapse stole all the spotlight so that everyone had little time to access the damage it had caused to other platforms.

But Autism Capital shed light on an event that had escaped most eagle-eyed observers amid the dark Luna times. It wrote, “Last month during the Terra blowup, $12M of bad debt was created by Abracadabra (the protocol behind MIM) because liquidations couldn’t happen fast enough to cover the protocol’s MIM liabilities. This news was swept under the rug.”

MIM
source: CoinMarketCap

Going further into the narrative, Autism Capital claimed that Abracadabra took down its analytics dashboard right away, claiming an upgrade. According to the report, the Abracadabra team alleged that the downtime of their analytics dashboard was purely coincidental.

Daniele Sestagalli, Abracadabra’s founder, however, dismissed claims of his platform being unable to pay the growing debt, resting concerns of insolvency in the process. He claimed that the “[Abracadabra] Treasury has more money than the debt and $CRV are valuable for the protocol.”

Daniele Sestagalli further strengthened the confidence of his investors by sharing the treasury’s address, which held $12 million in assets.

Abracadabra

More Details on the Debt

However, Autism Capital claimed that the bad debt occurred about five days ago. It wrote, “A couple days ago, the founder of MIM created even *more* bad debt by letting his SPELL position get liquidated.”

Abracadabra
source: Twitter

Autism Capital shared more proof, including a Discord screenshot of Daniele Sestagalli laughing off claims he won’t repay his bad debt.

Abracadabra

Sharing its thoughts, Autism Capital wrote, “We’re concerned that the protocol could become insolvent, either through the MIM treasury continuing to dump in value or more bad debt created. At that point, the rational thing to do for any MIM holder is to dump it, as the last person holding the bag would get nothing back.”

Autism Capital also claimed that Wonderland recently took out $50 million and moved it to USDC. Autism Capital further pointed out that Sifu, who also co-founded QuadrigaCX, runs Wonderland. The tweet claimed that Wonderland and Abracadabra were previously linked. However, despite reports that both platforms have split, Sifu allegedly has a strong presence in the Abracadabra Discord.

Further Discord screenshots showed Daniele Sestagalli claiming issues with his CEX limiting him from paying his debt, which he referred to as “small.”

Daniele Sestagalli

In Conclusion

Finally, we strongly advise investors to keep track of market movements and conduct their own research before making investment decisions while the possibility of insolvency continues to threaten the Abracadabra protocol. 

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