Tokenized Gold Proves Resilient as DeFi Collateral, But Adoption Remains Elusive
Tokenized gold has proven resilient as decentralized finance (DeFi) collateral, but adoption remains limited. According to a recent report by RedStone, tokenized gold spot trading volume reached $90.7 billion in the first quarter as physical bullion climbed to record highs.
The price of gold futures rallied above $5,600 per troy ounce during this period. However, very little of the asset is being put to work in DeFi, with only about $63 million worth of Tether Gold (XAUT) and PAX Gold (PAXG) currently being used as collateral on Aave v3 and Morpho.
This represents just 1.5% of the tokens' combined $4.2 billion market capitalization. The report notes that tokenized gold has already weathered a meaningful market test, with Aave processing its largest cluster of XAUT liquidations without disruption during a sharp sell-off in gold in late March.
Greg Shearer, JPMorgan precious metals strategist, described the sell-off as an 'extremely brutal flush.' Gold futures have declined more than 26% since peaking in January, pressured by expectations of higher US interest rates.