Tokenized Gold Weathered DeFi Stress Test, but Adoption Remains Elusive

Tokenized gold has proven resilient as DeFi collateral during market stress, but adoption remains limited. Demand for tokenized gold surged in the first quarter as physical bullion hit record highs, with a total of $90.7 billion in tokenized gold spot trading volume.

However, only about 1.5% of the combined $4.2 billion market capitalization of Tether Gold (XAUT) and PAX Gold (PAXG) is being used as collateral on Aave v3 and Morpho.

In a test case, Aave processed its largest cluster of XAUT liquidations without disruption during a sharp sell-off in gold on March 23. The event demonstrated that tokenized bullion can function reliably under market stress.