A RedStone report found tokenized gold processed its largest liquidation cluster without disruption during gold's sharp March sell-off, but adoption of the asset as decentralized finance collateral remains minimal. Tokenized gold trading volume reached $90.7 billion in the first quarter, yet only about $63 million of Tether Gold and PAX Gold is used as collateral on Aave and Morpho.
On March 23, Aave processed its largest cluster of Tether Gold (XAUT) liquidations without disruption during a sharp sell-off in gold. The event, detailed in a new report from data provider RedStone, shows tokenized bullion can hold up as collateral in decentralized finance under market stress.
That sell-off saw gold fall 10% over the previous week, its worst weekly performance in more than four decades. JPMorgan precious metals strategist Greg Shearer called the sell-off an "extremely brutal flush", according to Cointelegraph. Prices have declined more than 26% since peaking in January, pressured by expectations of higher US interest rates that reduced demand for non-yielding assets such as precious metals.
Tokenized gold's DeFi adoption gap
Demand for tokenized gold has surged this year as physical bullion climbed to record highs. Tokenized gold spot trading volume reached $90.7 billion in the first quarter as gold futures rallied above $5,600 per troy ounce, RedStone said. Yet only about $63 million worth of Tether Gold (XAUT) and PAX Gold (PAXG) is used as collateral on Aave v3 and Morpho — just 1.5% of the tokens' combined $4.2 billion market capitalization, according to the report.
Wider tokenized asset market keeps expanding
Gold is part of a growing market for tokenized real-world assets that also includes private credit and US Treasurys, with equities growing in importance. In June, Token Terminal reported the sector had topped $43 billion in value.
Centralized exchanges are also embracing tokenized assets to bridge traditional finance and crypto. A CoinGecko report found the emerging "crypto TradFi" market had grown to $6.6 billion as of June.
Source: Cointelegraph
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