Aave freezes $136 million tBTC market after Threshold suspends redemptions

On October 31, 2026, Aave froze new deposits and borrowing for its $136.6 million tBTC market on Ethereum V3 after Threshold Network suspended tBTC minting and redemptions for undisclosed security maintenance. Threshold reported that 4,320 BTC backs 4,185 tBTC, confirming no funds were lost. Risk managers LlamaRisk and Gauntlet moved to curtail exposure, citing potential secondary-market liquidity strains during collateral liquidations.

Aave freezes tBTC market

• ▪Aave's guardian multisig froze new deposits and borrowing on its Ethereum V3 Core tBTC reserve
• ▪Aave's freeze on its Ethereum V3 Core tBTC reserve allows existing users to continue repaying loans, withdrawing eligible collateral, and executing liquidations under existing risk parameters
• ▪Aave's tBTC markets on the Base and Arbitrum networks were already frozen prior to October 31, 2026 during earlier asset deprecation rounds

Threshold suspends bridge operations

• ▪Threshold Network suspended tBTC token minting, new Bitcoin deposits, and redemption requests on its Bitcoin bridge
• ▪Threshold Network instructed users on October 31, 2026 not to send Bitcoin to previously generated deposit addresses or repeat pending transactions during its Bitcoin bridge suspension
• ▪Threshold Network suspended tBTC operations without disclosing the specific security issue or setting a reopening date, but stated existing tBTC remains transferable across Ethereum and layer-2 networks

Threshold reports bridge funds remain secure

• ▪Threshold Network stated on October 31, 2026 that no funds were lost and investigators found no unauthorized token minting on the tBTC bridge
• ▪Threshold Network reported on October 31, 2026 that tBTC remained fully backed with 4,320 BTC held in bridge wallets against 4,185 tBTC in circulation

Risk managers respond to redemption suspension

• ▪Aave risk service provider LlamaRisk recommended the immediate freeze of tBTC on Aave's Ethereum V3 Core market following Threshold Network's operational suspension
• ▪Risk manager Gauntlet placed the tBTC-backed market on Gauntlet's emergency exclusion list and withdrew approximately 65,000 USDC from Gauntlet's Ethereum Morpho USDC Core vault on October 31, 2026

Redemption freeze impacts tBTC market liquidity

• ▪Gauntlet warned on October 31, 2026 that Threshold's redemption suspension could impact tBTC secondary-market liquidity and impede lenders attempting to exit positions during liquidations
• ▪Suspension of direct Threshold redemptions on October 31, 2026 forces tBTC holders seeking native Bitcoin to rely on secondary-market buyers, where price discounts or liquidity declines complicate collateral liquidations