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Tokenized gold holds up in DeFi stress test as collateral use stays low

A RedStone report said only about $63 million of tokenized gold is posted as collateral on Aave v3 and Morpho, equal to roughly 1.5% of XAUT and PAXG’s combined market value.

Reported · Written up by our desk · Regulation

Cointelegraph reports that a RedStone analysis found tokenized bullion remained functional during a sharp gold sell-off, including through Aave liquidation activity, even as decentralized finance adoption for the asset stays limited.

According to the report, tokenized gold spot trading volume reached $90.7 billion in the first quarter, with gold futures rallying above $5,600 per troy ounce. However, RedStone said only about $63 million worth of Tether Gold (XAUT) and PAX Gold (PAXG) is currently used as collateral on Aave v3 and Morpho.

The report points to a market test on March 23, when Aave processed its largest cluster of XAUT liquidations without disruption during the downturn. It also notes gold fell 10% over the prior week, its worst weekly performance in more than four decades.

Cointelegraph adds that gold futures have since declined more than 26% from their January peak, as expectations for higher US interest rates have pressured demand for non-yielding assets like precious metals. RedStone said the resilience supports tokenized gold’s role as DeFi collateral, but the low collateral deployment highlights an adoption gap as tokenized RWA markets expand.

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