Aave Freezes $136M tBTC Market After Threshold Suspends Redemptions
Aave restricted additional tBTC deposits and borrowing against the token after Threshold Network suspended tBTC minting and Bitcoin redemptions. Threshold halted its Bitcoin bridge for undisclosed security maintenance, prompting decentralized lending protocols to cut exposure. A governance notice dated Oct. 31 said the Aave guardian multisig imposed the restriction at 10:01 UTC.
The affected market then held about 1,760 tBTC valued at $136.6 million, or roughly 42% of circulating tBTC. A Threshold security update on Oct. 31 said bridge wallets contained approximately 4,320 BTC backing 4,185 tBTC in circulation, leaving reserves about 135 BTC above circulating supply. Threshold said tBTC remained fully backed, no funds were lost and investigators found no unauthorized minting. It described the situation as contained and said bridge operations would resume after remediation. Threshold has not identified the specific security issue or announced a reopening date.
Existing tBTC can still move across Ethereum and layer-2 networks even as new Bitcoin deposits, minting and redemption requests remain suspended. Pending transactions will be processed once bridge operations restart. Threshold urged users not to send Bitcoin to previously generated deposit addresses or resubmit pending transactions. It promised another security update within 24 hours of the Oct. 31 announcement, or sooner if circumstances changed.
LlamaRisk, a risk service provider for Aave, recommended freezing tBTC in the Aave Ethereum V3 Core market immediately after the bridge suspension. The move blocks additional tBTC deposits and prevents use of the token to expand borrowing capacity. The freeze applies only to the Ethereum Core tBTC reserve. Aave tBTC markets on Base and Arbitrum were already frozen in earlier asset deprecation rounds. Existing users can still repay loans and withdraw eligible collateral, and liquidations continue under existing risk parameters. LlamaRisk said collateral positions and secondary-market liquidity will stay under review before it recommends restoring normal Aave operations.
tBTC lets Bitcoin holders use Bitcoin-backed collateral for decentralized finance loans. A Gauntlet statement on Oct. 31 disclosed 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 and withdrew about 65,000 USDC of available liquidity, leaving around 640,000 USDC supplied to the market. It 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 discount to Bitcoin could complicate collateral liquidations, especially in lending markets with significant tBTC exposure.
