RedStone published a report on July 30, 2026, analyzing how tokenized gold performed as decentralized finance collateral during March’s sharp market downturn, finding that while the assets weathered the volatility, lending adoption remained minimal despite explosive trading growth.
On March 23, gold futures fell 10% over the previous week, marking the worst weekly performance in more than four decades. Gold futures had declined more than 26% since peaking in January, pressured by expectations of higher US interest rates reducing demand for non-yielding assets. During this sell-off, Aave v3 processed liquidations without disruption, according to RedStone’s analysis.
The stress test revealed a stark mismatch between trading activity and collateral deployment. Tokenized gold, comprising Tether Gold (XAUT) and PAX Gold (PAXG), generated $90.7 billion in spot trading volume during the first quarter of 2026. Yet only $63 million of XAUT and PAXG was used as collateral across Aave v3 and Morpho, representing just 1.5% of the combined $4.2 billion market capitalization of both tokens.
Greg Shearer, JPMorgan’s precious metals strategist, characterized the March decline as an “extremely brutal flush,” underscoring the severity of the sell-off that tested tokenized gold’s resilience.
Demand for tokenized gold surged throughout 2026 as physical bullion climbed to record highs. Tokenized gold forms part of a broader tokenized real-world asset (RWA) sector that expanded to $43 billion by June 2026, alongside private credit, US Treasurys, and equities. The crypto traditional finance market reached $6.6 billion in value as of June, with centralized crypto exchanges increasingly adopting tokenized assets to bridge traditional finance and digital markets.
Late March liquidations peaked across both Morpho and Aave v3, yet the protocols handled the activity without operational strain. RedStone’s report indicates that while tokenized gold proved resilient during market stress, the low collateral usage suggests barriers to broader DeFi adoption despite the asset class’s growing market presence.
