Aave has frozen new deposits and borrowing against roughly $136 million in tokenized bitcoin on its Ethereum Core market, after Threshold Network suspended minting and redemptions for its tBTC token.

Threshold paused its bitcoin bridge on Oct. 31 to carry out security maintenance and has not disclosed the nature of the issue. tBTC, operated by Threshold, lets bitcoin holders use their coins on Ethereum and other networks, and it is widely used as collateral for loans in decentralized finance. It is one of several bitcoin-backed tokens in circulation on Ethereum, a category that also includes widely held wrapped-bitcoin assets such as WBTC and cbBTC, and all of them depend on a bridge or custodian keeping minting and redemption open.

Threshold Says tBTC Remains Fully Backed

In an Oct. 31 security update, Threshold said about 4,320 bitcoin sit in its bridge wallets. That compares with 4,185 tBTC in circulation, leaving reserves roughly 135 bitcoin above the token supply.

“tBTC remains fully backed, and no funds have been lost,” the project said. It added that investigators found no unauthorized minting of new tokens.

tBTC pause and security update

tBTC remains fully backed and no funds have been lost. Currently, 4,320 BTC sits in the bridge wallets against roughly 4,185 tBTC in circulation, and we've seen no unauthorized minting. Reserves can be verified on-chain here:…

— Threshold Network ✜ (@TheTNetwork) October 31, 2026 — view post

Existing tBTC can still be moved across Ethereum and layer-2 networks. New bitcoin deposits, minting and redemption requests are on hold, and pending transactions will be completed once operations resume. Threshold has not given a date for the bridge to reopen, saying the situation is contained and that full service will return once the fix is in place.

Aave and Gauntlet Limit Exposure

Aave risk provider LlamaRisk recommended an immediate freeze of tBTC on Aave's Ethereum V3 Core market, and Aave's guardian multisig — an emergency mechanism that can enact risk changes without a full governance vote — carried out the change at 10:01 UTC on Oct. 31. At the time, about 1,760 tBTC worth $136.6 million was supplied to the market — roughly 42% of all tBTC in circulation.

Users can no longer deposit more tBTC or use the token to increase borrowing power. They can still repay loans and withdraw eligible collateral, and liquidations continue under the same rules. The freeze only affects Aave's Ethereum Core market; tBTC markets on Base and Arbitrum were already frozen during earlier rounds of asset removals.

LlamaRisk said it will keep monitoring collateral positions and trading liquidity, and will recommend restoring normal operations once conditions allow.

Risk manager Gauntlet also acted on Oct. 31. Its Ethereum Morpho USDC Core vault had about 704,000 USDC supplied to a lending market backed by tBTC. Gauntlet placed that market on its emergency exclusion list and withdrew about 65,000 USDC, leaving around 640,000 USDC supplied.

The firm warned that the pause could hurt tBTC trading liquidity. With redemptions closed, holders who want native bitcoin must find buyers on secondary markets. If tBTC trades at a discount to bitcoin, collateral liquidations could become harder for lenders — a risk that is higher for markets holding large amounts of the token. That dynamic reaches beyond one protocol: the ability to redeem a bitcoin-backed token for the underlying coin is what keeps its market price tied to bitcoin's, which is why risk managers watch redemption channels closely during any bridge pause.

Threshold has 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 conditions change. Until then, the signposts to watch are the promised update, whether on-chain reserves stay above the tBTC supply, how tBTC trades against bitcoin on secondary markets, and when minting and redemptions resume.