Aave Freezes $136M tBTC Market After Threshold Suspends Bitcoin Bridge

Aave has blocked additional tBTC deposits and borrowing against the token after Threshold Network suspended tBTC minting and Bitcoin redemptions. Threshold halted the Bitcoin bridge for undisclosed security maintenance, prompting decentralized lending protocols to cut exposure. An October 31 governance notice said the Aave guardian multisig imposed the restriction at 10:01 UTC. At the time, the market held about 1,760 tBTC valued at $136.6 million, or roughly 42% of circulating tBTC. Threshold said in an October 31 security update that bridge wallets contained approximately 4,320 BTC backing 4,185 tBTC in circulation. Reserves exceeded circulating supply by about 135 BTC. Threshold said tBTC remains fully backed and no funds were lost. Investigators found no unauthorized minting. Threshold described the situation as contained and said bridge operations would resume after remediation. It has not identified the specific security problem or announced a reopening date. Existing tBTC can still move across Ethereum and layer-2 networks even though new Bitcoin deposits, minting and redemption requests are suspended. Pending transactions will be processed once bridge operations restart. Threshold urged users not to send Bitcoin to deposit addresses generated previously and not to resubmit pending transactions. It promised another security update within 24 hours of the October 31 announcement, or earlier if circumstances changed. Aave risk service provider LlamaRisk recommended immediately freezing tBTC in the Aave Ethereum V3 Core market after the bridge suspension. The restriction prevents additional tBTC deposits and the use of tBTC to expand borrowing capacity. The freeze applies only to the Ethereum Core tBTC reserve. Aave tBTC markets on Base and Arbitrum were already frozen through earlier asset deprecation rounds. Existing users can still repay loans and withdraw eligible collateral. Liquidations continue under the risk parameters already in place. LlamaRisk said collateral positions and secondary-market liquidity would remain under review before it recommends restoring normal Aave operations. The token lets Bitcoin holders use Bitcoin-backed collateral for decentralized finance loans. Gauntlet said in an October 31 statement that it had about 704,000 USDC of exposure through the Ethereum Morpho USDC Core vault to a market secured by tBTC collateral. Gauntlet added the market to an emergency exclusion list. It withdrew about 65,000 USDC of available liquidity, leaving around 640,000 USDC supplied to the market. Gauntlet warned that suspended redemptions could impair tBTC secondary-market liquidity and the ability of lenders to exit positions during liquidations. Holders seeking native Bitcoin must find secondary-market buyers while the Threshold redemption mechanism is unavailable. A substantial loss of liquidity or a price discount to Bitcoin could complicate collateral liquidations, especially in lending markets with significant tBTC exposure.