Aave Slams Brakes on $136M tBTC Market After Threshold Pauses Redemptions

Aave locked down its tBTC market on Ethereum on Oct. 31, barring new deposits and fresh borrowing against the tokenized bitcoin. The guardian multisig executed the freeze at 10:01 UTC, following a recommendation from risk provider LlamaRisk. At the time, about 1,760 tBTC worth $136.6 million sat in the Ethereum V3 Core market — roughly 42% of every tBTC in existence.

The trigger was Threshold Network, which paused minting and redemptions on its tBTC bridge the same day for what it called security maintenance. Threshold hasn't disclosed the nature of the issue or set a date for reopening. In its security update, the project said 4,320 bitcoin sit in bridge wallets against about 4,185 tBTC in circulation, leaving reserves roughly 135 bitcoin above supply. 'tBTC remains fully backed, and no funds have been lost,' Threshold stated, adding that investigators found no unauthorized minting.

Existing tBTC can still move across Ethereum and layer-2 networks, but new bitcoin deposits and redemption requests are on hold. Pending transactions will clear once operations resume. That matters because tBTC is a popular collateral asset in DeFi — with redemptions shut, holders who want native bitcoin have to find buyers on secondary markets. If tBTC slips to a discount, liquidations get messier for lenders, especially in markets stuffed with the token.

Gauntlet moved fast too. Its Ethereum Morpho USDC Core vault had about 704,000 USDC supplied to a tBTC-backed lending market, and the firm dropped that market onto its emergency exclusion list. It pulled roughly 65,000 USDC, leaving around 640,000 USDC supplied.

Aave users can still repay loans and withdraw eligible collateral, and liquidations keep running under the usual rules. The freeze is limited to the Ethereum Core market — tBTC markets on Base and Arbitrum were already frozen in earlier rounds of asset removals. LlamaRisk says it will keep watching collateral positions and trading liquidity, and will push to restore normal operations when conditions allow.

Threshold told users not to send bitcoin to old deposit addresses or repeat pending transactions. The project promised another security update within 24 hours of its Oct. 31 notice, or sooner if anything changes.