Tokenized gold passes DeFi stress test, but less than 2% is used as collateralA RedStone report found tokenized bullion held up during gold’s sharp sell-off, but DeFi lending adoption remains limited despite surging market growth and trading volumes.
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According to a new report by RedStone, the demand for tokenized gold has surged in 2024 as physical gold prices reached record highs, with tokenized gold spot trading volume hitting $90.7 billion in the first quarter. Despite this strong market activity and gold futures rallying above $5,600 per troy ounce, only a small portion of tokenized gold is being utilized within decentralized finance (DeFi). The report finds that just about $63 million of Tether Gold (XAUT) and PAX Gold (PAXG)—which together have a market capitalization of $4.2 billion—is used as collateral on the DeFi platforms Aave v3 and Morpho, representing only 1.5% of the total token supply.
The report highlights that tokenized gold has nevertheless passed an important stress test in DeFi during market turbulence. On March 23, during a sharp gold price sell-off following a 10% weekly decline—the worst weekly drop in over 40 years—Aave handled a large cluster of XAUT liquidations without disruption. This demonstrated that tokenized gold can operate reliably as DeFi collateral under stress, even amid significant market volatility described by JPMorgan strategist Greg Shearer as an “extremely brutal flush.”
Since its January peak, gold futures have dropped over 26%, pressured mainly by expectations of rising US interest rates that diminish demand for non-yield-bearing assets like gold. RedStone notes that while tokenized gold has shown resilience, broader adoption within DeFi remains limited. This points to a notable infrastructure challenge as tokenized real-world assets (RWA) such as gold, private credit, and US Treasurys expand rapidly—the total sector reportedly crossed $43 billion in value as of June.
Meanwhile, centralized cryptocurrency exchanges are increasingly embracing tokenized assets, facilitating greater integration between traditional finance and digital assets. CoinGecko recently reported the emerging “crypto TradFi” market had grown to $6.6 billion by June. The overall development indicates cautious but growing interest in tokenized commodities, even as adoption hurdles remain on the DeFi lending side.