Tokenized gold weathers DeFi liquidations; <2% used as collateral
Large XAUT liquidations on Aave and Morpho in March were processed without disruption, but about $63 million — under 2% of the $4.2 billion tokenized-gold market — is used as DeFi collateral.
RedStone reported that tokenized gold spot trading reached $90.7 billion in the first quarter as gold futures rose above $5,600 per troy ounce. The report found about $63 million of Tether Gold (XAUT) and PAX Gold (PAXG) was posted as collateral on Aave v3 and Morpho, roughly 1.5% of the tokens’ combined $4.2 billion market capitalization.
On March 23, Aave processed its largest cluster of XAUT liquidations during a week when gold futures fell about 10%, the worst weekly drop in more than 40 years. Morpho and Aave saw tokenized gold liquidations peak in late March. Both platforms handled the surge without reported operational failures.
Since peaking in January, gold futures declined more than 26% as markets priced higher U.S. interest rates, reducing demand for non-yielding assets. Borrowers using XAUT for leverage were forced to cover positions during the sell-off.
JPMorgan precious metals strategist Greg Shearer described the sell-off as an “extremely brutal flush.”
RedStone noted the gap between high trading volumes and low use of tokenized gold as DeFi collateral and described the disparity as an infrastructure and adoption challenge for tokenized real-world assets. Tokenized RWAs include private credit and U.S. Treasurys; Token Terminal reported the sector reached $43 billion in June. Centralized exchanges have been listing tokenized assets, and CoinGecko estimated the emerging “crypto TradFi” market at $6.6 billion in June.
About $63 million of tokenized gold is currently used as collateral on Aave v3 and Morpho. The remaining supply appears to be held for trading, custody, or other uses rather than being deployed in lending protocols.
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