Tokenized gold demonstrated resilience during a market sell-off, but adoption within decentralized finance lending protocols remains limited, according to a RedStone report. While spot trading volume for tokenized bullion reached $90.7 billion in the first quarter, only $63 million worth of Tether Gold (XAUT) and PAX Gold (PAXG) is deployed as collateral on Aave v3 and Morpho — just 1.5 percent of their combined $4.2 billion market capitalization.
On March 23, Aave processed its largest cluster of XAUT liquidations without disruption following a 10 percent weekly decline in gold prices, the worst week in more than four decades. The stress test showed tokenized gold functioning reliably as DeFi collateral under market pressure.
Gold futures have declined more than 26 percent since peaking in January, attributed to expectations of higher U.S. interest rates, which reduce demand for non-yielding assets.
The findings reveal a gap between tokenized gold's proven stability as collateral and its limited integration into lending protocols. The broader tokenized real-world asset market — including private credit, U.S. Treasurys and equities — surpassed $43 billion in value in June, according to Token Terminal. Centralized crypto exchanges are also embracing tokenized assets, with the crypto TradFi market reaching $6.6 billion as of June, according to CoinGecko.
