MIM's security depends on assets external to the MIM system (yvWETH, yvUSDC, xSUSHI, WBTC, WETH, SHIB and others), so MIM has a better chance to safely wind down to zero users without going into a death spiral.
If the demand for lending drops faster than for holding, then the MIM price can go higher until it hits the ceiling of 2$ (but probably much lower) after which it will become profitable to buy collateral on the market to borrow and sell MIM for more value than the collateral itself.
If the demand for holding drops faster than for lending, then the MIM price may decrease. There is a hypothetical scenario of market events that can affect the price of MIM:
- An adversarial «whale» borrows a large amount of MIM and sells it on the market for a price close to the 1$ peg.
- The attacker launches a F.U.D. campaign targeting MIM holders so that they start selling their MIM.
- The MIM price starts to drop and people start to buy MIM to return their debt for cheap.
- This continues until only «whale» debtors remain in the system, who are ready to wait until the price drops even lower.
- If MIM holders continue to sell in a panic, whales can wait until the coin drops to the lowest point and buy it back only then.
It is necessary to emphasize that the aforementioned scenario is unrealistic
. The adversarial «whale» will still need to return the debt to unlock their collateral. The only way to do it is to buy back MIM. This will create an opportunity for other players to buy MIM before the whale in order to dictate a higher price to the whale themselves.