According to CoinGecko statistics, the MIM stablecoin dropped as low as $0.95 before recovering to $0.98 as of 5:30 a.m. ET.
While it is not immediately apparent why the stablecoin lost its dollar parity, suspicions that a part of its value is backed by FTT, the native token of the troubled FTX exchange, may have been the probable cause. This token is at the centre of a scandal over the finances of FTX’s sister company, Alameda Research.
Abracadabra is a decentralized financial initiative that allows anybody to deposit collateral to manufacture a dollar-pegged MIM stablecoin through an over-collateralized loan. According to CoinGecko, it has an estimated market value of $153 million.
According to Abracadabra statistics, MIM is backed by a basket of several cryptocurrencies, with FTT collateral being 18% of the entire MIM supply borrowed from the protocol. This $28 million exists as MIM stablecoin that Alameda borrowed using FTT as collateral, according to on-chain data from several Alameda wallets.
Abracadabra uses an on-chain liquidation method to guarantee that all stablecoins are overcollateralized. Therefore, every MIM loan on Abracadabra gets liquidated if the collateral’s price falls below a particular threshold.
Alameda has $126 million (in FTT tokens) on Abracadabra as collateral on its MIM loan, indicating that the collateral significantly surpasses the loaned stablecoin’s value. Given its over-collateralized position, MIM is far from being liquidated, which is a positive factor for its underlying value.
Still, MIM stablecoin investors have responded badly to worries over the financial health of Alameda, the sibling company of the FTX exchange, as well as Binance’s rumoured $500 million sale of FTT.