MIM De-Peg

Last Saturday, June 18^th, $MIM (Magic Internet Money) lost its Peg against the US Dollar. At the lowest $MIM had a price of $0.935, a 6.5% de-peg from the Dollar.  

MIM is a stablecoin minted by Abracadabra.money that is algorithmically “Pegged” to the US Dollar. Abracadabra uses interest-bearing crypto assets as collateral to mint MIM, which can be re-invested and swapped for other stablecoins.  

Here is an early report by Autism Capital:

We have a scoop from one of our associate autists: MIM (Magic Internet Money) may be nearly insolvent. MIM is one of the larger stablecoins, with a market cap of ~$300M.

We can't believe that a project called Magic Internet Money has been acting irresponsibly either.

Details:

— Autism Capital 🧩 (@AutismCapital) June 17, 2022

The InsurAce team was following the situation closely.  

At the time we were tracking the 10-day TWAP price. Our policy wording for MIM De-Peg states that a 10-day average price of $0.93 is required for a De-Peg event to be triggered. During this temporary de-peg, the 10-day TWAP based on a OHLC price is $1. 

InsurAce had active cover exposure of $1,524,245 USD as of the time of this de-peg occurrence.  

We understand the concerns of both policy-holders and stakers following the recent De-Peg of UST and the subsequent payout to policy holders.  

The significant difference between MIM and UST is that MIM is minted from depositing other assets into Abracadabara.Money which means underlying investment assets may not be affected and a loss may not be as significant.  

The Abracadabra team have reported that the collateralization of MIM is around 160% as of 4:00:00 Saturday 18^th June UTC.  

Here is a favourable analysis of MIM collateralisation:

The number of DMs I got about this 😂

Lads MIM isn’t UST it’s backed and tons of it is minted against like eth and stables

It does not have the best mechanisms to hold peg but it’s not going to 0 or anything like that https://t.co/TxpAwuRgTH

— DCF GOD (@dcfgod) June 18, 2022

The price of $MIM has since returned to it’s Peg of ~$1USD. As always, we continue to remain vigilant of the latest prices and industry news.  

Many learnings from the UST De-Peg would have been implemented in how InsurAce handled this event if the De-Peg had continued. Some of these may have been used to minimise the exposure to the MIM De-Peg event: 

• There may be the option to sell the MIM early and pay losses, instead of waiting to swap following a vote.  
• The position on MIM may be hedged by the purchase of a short position on MIM.  
• A stop-loss price to sell may be implemented 
• Additional amount of MIM bought/credited after 10 days before trigger time will not covered. 
• Amount sold in the 10 days before trigger time is not covered. 

We will keep the community informed of any updates as we have them. A special Discord channel has been created for this discussion: https://discord.gg/qVavwrGm 

We encourage any MIM Policy holders to email us with their details so we can keep them informed of any updates directly. Please email contact@insurace.io