Aave Restricts $136 Million tBTC Market After Bitcoin Redemptions Pause

Aave has moved to contain its exposure to tBTC after Threshold Network paused the token’s Bitcoin bridge operations.

The restriction blocks new tBTC deposits and prevents the asset from adding fresh borrowing power on Aave’s Ethereum Core market. It does not liquidate existing users, freeze the entire protocol or stop borrowers from repaying debt.

The move matters because roughly 1,760 tBTC worth about $136.6 million was supplied to that market, representing approximately 42% of the token’s circulating supply. A prolonged redemption outage could make it harder for lenders and liquidators to convert tBTC back into native Bitcoin without relying on secondary-market buyers.

Threshold announced the precautionary pause first:

tBTC minting and redemptions temporarily paused

We have temporarily paused new BTC deposits/tBTC minting and new Bitcoin redemption requests through the Threshold app as a precaution while security maintenance is completed. Pending redemptions may still be paid on Bitcoin, but…

— Threshold Network ✜ (@TheTNetwork) October 30, 2026

CryptoSlate reported that Threshold held approximately 4,320 BTC in bridge wallets against 4,185 tBTC in circulation. The project said no funds had been lost and that investigators had found no unauthorized minting.

That leaves reported reserves about 135 BTC above the circulating token supply. Threshold said the interruption was contained and bridge functions would return after remediation, but it had not disclosed the specific security issue or supplied a reopening date.

Existing tBTC remains transferable across Ethereum and layer-2 networks. New Bitcoin deposits, token minting and redemption requests are suspended, while pending transactions are expected to complete after operations resume.

Threshold also warned users not to send Bitcoin to previously generated deposit addresses or repeat pending transactions. The project pledged another security update within 24 hours of its October 31 announcement, or sooner if conditions changed.

That backing is important, but it does not remove the liquidity problem created by a closed redemption route. Holders seeking native Bitcoin must wait for Threshold to reopen redemptions or sell into secondary markets.

If those markets weaken or tBTC trades at a discount, collateral exits and liquidations become more complicated.

Aave’s governance notice says its guardian multisig executed the Ethereum Core freeze at 10:01 UTC on October 31. New tBTC supply is blocked, and existing tBTC can no longer add borrowing power to a position.

Users can still repay, withdraw eligible collateral and add other assets to improve their health factor. Liquidations continue under the existing risk settings.

The freeze applies only to tBTC on Aave V3 Ethereum Core. Its Base and Arbitrum reserves were already frozen in earlier asset-deprecation rounds, so no other reserve or Aave market was paused by this action.

Aave said it will keep monitoring tBTC positions and secondary-market liquidity. Restorative measures would be proposed only after Threshold provides assurance that normal minting and redemption operations have returned.

Aave described the measure as a proactive containment step rather than evidence of a problem in its own contracts:

As a routine, proactive step following @TheTNetwork’s maintenance update on tBTC, we’ve restricted new tBTC deposits and new borrows against tBTC on Aave.

Aave’s contracts are not affected, existing positions remain unchanged, and users can continue to repay and withdraw as… https://t.co/wFmEqp40L0

— Aave (@aave) October 31, 2026

The restriction applies only to tBTC on Aave V3 Ethereum Core. The Base and Arbitrum reserves had already been frozen during earlier asset-deprecation rounds, and no other Aave reserve was affected by this action.

Other risk managers are watching the same pressure point. Gauntlet placed a tBTC-backed Morpho market on an emergency exclusion list and withdrew available liquidity, warning that a redemption pause could reduce secondary-market depth during liquidations.

The core question is no longer whether tBTC reports enough Bitcoin in reserve. It is how quickly the bridge can restore the convertibility that makes the reserve useful to DeFi lenders.

Until Threshold explains the security issue and provides a reopening timeline, Aave’s decision keeps the existing market functioning while preventing the exposure from getting larger.

Join the conversation!

We have no tolerance for comments containing violence, racism, profanity, vulgarity, doxing, or discourteous behavior. If a comment is spam, instead of replying to it please click the icon below and to the right of that comment. Thank you for partnering with us to maintain fruitful conversation.