Aave Freezes $136M tBTC Market as Threshold Halts Bitcoin Redemptions

Published November 2, 2026, 12:40 AM PKT. Based on Threshold Network's October 31, 2026 security update, Aave risk provider LlamaRisk's October 31, 2026 governance notice, Gauntlet's October 31, 2026 statement, and reporting by KuCoin and Coindoo on November 1, 2026.

Aave has frozen its $136 million tBTC market after the Bitcoin bridge behind the token shut its exit door. Aave's guardian multisig executed the freeze on the protocol's Ethereum V3 Core market at 10:01 UTC on October 31, 2026, according to an October 31 governance notice cited by KuCoin and Coindoo, after Threshold Network suspended tBTC minting and Bitcoin redemptions for security maintenance. The market held about 1,760 tBTC worth about $136.6 million at the time of the freeze, roughly 42% of circulating tBTC, KuCoin reported on November 1. The freeze blocks new tBTC deposits and stops borrowers from using tBTC to expand borrowing capacity, but it does not touch existing positions: users can still repay loans and withdraw eligible collateral, and liquidations continue under the risk parameters already in place, LlamaRisk said. The distinction matters because tBTC is a Bitcoin-backed token that only becomes native Bitcoin again through Threshold's bridge, and that bridge is now closed.

The freeze: new deposits off, borrowing power set to zero

The freeze works through two settings. Aave's guardian transaction set tBTC's borrowing loan-to-value ratio to zero, Coindoo reported, which removes tBTC's power as fresh borrowing collateral, while leaving the liquidation threshold at 78%, so existing collateral positions can still be liquidated under the old terms. LlamaRisk, Aave's risk service provider, recommended the freeze immediately after Threshold suspended the bridge, and said it will keep collateral positions and tBTC's secondary-market liquidity under review before recommending a return to normal operations. The restriction affects only the Ethereum Core tBTC reserve. Aave's tBTC markets on Base and Arbitrum were already frozen through earlier asset deprecation rounds, KuCoin noted, so Ethereum Core was the last live tBTC market on Aave, and it is now closed to new supply and new borrowing too.

The bridge pause behind the freeze

Threshold stopped new Bitcoin deposits and new redemption requests on October 30, 2026 at 22:35 UTC, calling the step a precaution while security maintenance is completed, according to CryptoCompass's November 1 account of the announcement. Its October 31 security update then gave the reserve picture: bridge wallets hold about 4,320 BTC against about 4,185 tBTC in circulation, a surplus of about 135 BTC, and Threshold said tBTC retains full backing, no funds have been lost, and investigators found no unauthorized minting. Those figures are Threshold's own claims, and they come with two gaps. Threshold has neither identified the specific security problem nor announced a reopening date, KuCoin reported, saying only that the situation is contained and bridge operations will resume once remediation is complete. Threshold promised another security update within 24 hours of its October 31 announcement, or sooner if circumstances changed. In the meantime, existing tBTC still moves normally on Ethereum and layer-2 networks, pending transactions will be processed once the bridge restarts, and Threshold urged users not to send Bitcoin to previously generated deposit addresses and not to resubmit pending transactions.

The $704,000 Gauntlet exposure and the liquidity warning

The freeze also reached a second lending venue. Gauntlet disclosed on October 31 that it had about $704,000 in USDC exposure through its Ethereum Morpho USDC Core vault to a market secured by tBTC collateral, KuCoin reported. Gauntlet added the market to an emergency exclusion list and withdrew about $65,000 in available liquidity, leaving around $640,000 supplied to the market. Gauntlet warned that suspended redemptions could impair tBTC's secondary-market liquidity and lenders' ability to exit positions during liquidations. That warning is the practical risk for holders right now. With the redemption route closed, anyone holding tBTC who wants native Bitcoin must find a buyer on the secondary market, KuCoin noted, and a substantial loss of liquidity or a price discount against Bitcoin could complicate collateral liquidations, especially in lending markets with significant tBTC exposure.

Two reopenings, not one

Even a Threshold restart would not end the freeze on its own. LlamaRisk said it will watch Threshold's updates, Aave positions and tBTC's market liquidity before proposing to restore the settings, Coindoo reported, and Threshold resuming redemptions would not reopen Aave automatically. Full recovery takes three visible steps: redemptions running again, Bitcoin payouts completing, and an Aave governance action restoring tBTC's supply and borrowing settings. The next markers to watch are Threshold's promised follow-up update, any resumption timeline for the bridge, and whether tBTC holds its peg to Bitcoin on secondary markets while the exit stays shut. Until then, the episode stands as a reminder of the gap between backing and access: Threshold says every tBTC is backed by Bitcoin in its wallets, but holders cannot currently turn the token back into Bitcoin, and the largest DeFi lender has closed its tBTC market until that changes.

This article is news reporting and is not investment advice.

Sources

• Threshold Network, October 31, 2026 security update, as reported by KuCoin (primary source: about 4,320 BTC in bridge wallets against about 4,185 tBTC in circulation, no funds lost, no unauthorized minting found, situation contained, no reopening date announced, follow-up update promised within 24 hours)
• LlamaRisk, October 31, 2026 governance notice, as reported by Coindoo (primary source: Aave guardian multisig freeze executed at 10:01 UTC on October 31, borrowing loan-to-value set to zero, liquidation threshold left at 78%, restore conditions)
• KuCoin, Aave Freezes $136M tBTC Market After Threshold Halts Redemptions (November 1, 2026, secondary source: about 1,760 tBTC worth about $136.6 million, roughly 42% of circulating tBTC, Base and Arbitrum markets already frozen, Gauntlet $704,000 exposure and $65,000 liquidity withdrawal, secondary-market exit for holders)
• Coindoo, Aave Freezes tBTC After Its Bitcoin Exit Door Locks (November 1, 2026, secondary source: freeze mechanics, existing positions unaffected, two reopenings needed before Aave restores normal operations)