Tokenized gold passes DeFi stress test, but less than 2% is used as collateral

Demand for tokenized gold has surged this year as physical bullion climbed to record highs, but very little of the asset is being put to work in decentralized finance, highlighting a major adoption gap, according to a new report by RedStone.Tokenized gold spot trading volume reached $90.7 billion in the first quarter as gold futures rallied above $5,600 per troy ounce. Yet only about $63 million worth of Tether Gold (XAUT) and PAX Gold (PAXG) is currently being used as collateral on Aave v3 and Morpho, RedStone said. That’s just 1.5% of the tokens’ combined $4.2 billion market capitalization.Despite the limited adoption, tokenized gold has already weathered a meaningful market test, RedStone said.On March 23, Aave processed its largest cluster of XAUT liquidations without disruption during a sharp sell-off in gold, demonstrating that tokenized bullion can function reliably as DeFi collateral under market stress.The liquidation event came after gold fell 10% over the previous week — its worst weekly performance in more than four decades. JPMorgan precious metals strategist Greg Shearer described the sell-off as an “extremely brutal flush.”Tokenized gold liquidations peaked in late M...