A significant cryptocurrency investor, often referred to as a "crypto whale," has employed a five-year-old leveraged decentralized finance (DeFi) strategy to acquire tokenized gold. This move occurs even as the prices of physical gold bullion show signs of moderating after reaching recent record highs.
According to blockchain data analyzed by Lookonchain and shared on social platform X, the large wallet has accumulated tokenized gold valued at approximately $38.4 million over the past 20 days. This was achieved through a process of looped borrowing on Aave, a prominent lending protocol within the DeFi ecosystem.
The whale, identified by the wallet address 0x8522, purchased 8,337 units of tokenized gold. This acquisition was facilitated by extensive borrowing against stablecoin collateral, as identified by the analytics firm Lookonchain.
Leveraged Gold Exposure Through Looped Borrowing
Transactional data from deBank indicates that the wallet repeatedly borrowed USDe and subsequently swapped it for XAUt, a token backed by gold. In each transaction, the whale borrowed approximately $11,600 worth of USDe, which was then converted into roughly 2.51 units of XAUt.
Whales are using looped borrowing to buy #gold.
Wallet 0x8522 has bought 8,337 $XAUt($38.4M) over the past 20 days, while borrowing 18.3M $USDe from Aave.https://t.co/C1ii4MVoVcpic.twitter.com/9A8dtYxiLm
— Lookonchain (@lookonchain) January 16, 2026
In total, the address borrowed approximately $18.3 million in USDe from Aave. The funds were routed through CoW swap, a decentralized exchange aggregator.
Looped borrowing is a DeFi tactic that involves depositing an asset as collateral, borrowing against that collateral, and then redepositing the borrowed amount back into the same protocol. This process can be repeated multiple times to amplify exposure.
For instance, a user might deposit one unit of an asset into Aave. They could then borrow up to a certain percentage of its value, determined by loan-to-value limits, and subsequently redeposit this borrowed amount. After a single loop, a deposit of one ETH could effectively result in 1.75 ETH being supplied and 0.75 ETH being borrowed. Performing several loops can magnify the leveraged exposure, but it also increases the risk of liquidation if market prices become more volatile.
While the identity of the first trader to utilize looped borrowing remains unknown, the strategy gained public attention during the yield farming boom of 2020. During this period, incentives from governance tokens made leveraged positions particularly attractive to the DeFi community. Some users had already experimented with similar mechanics following the launch of MakerDAO in 2017.
Currently, looping is a common practice on protocols such as Aave, Morpho, and Spark. Morpho has previously reported that a significant portion of its trading volume originates from users who have looped their assets.
Tokenized Gold Trades Persist as Bullion Price Rally Cools
The whale's acquisition of tokenized gold is occurring as global gold prices have experienced their first consecutive losses since the start of the year, closing on Thursday and continuing into Friday morning US sessions. Spot gold extended its decline from the previous trading session, influenced by stronger US economic data and a period of reduced geopolitical tension.
Gold prices dipped by 0.1% to $4,610.86 per ounce by 12:00 GMT. This follows an earlier high of $4,642.72 reached during the week. Despite this recent pullback, gold is on track to conclude the business week with an approximate 2% gain.
US gold futures for February delivery saw a decline of 0.2%, settling at $4,615. Concurrently, the US dollar index hovered near a six-week high. Economic data from the US released earlier in the week indicated that initial jobless claims fell to 198,000 last week, a figure significantly below economists' expectations.
Historically, a stronger US dollar tends to make gold more expensive for international buyers.
Julius Baer analyst Carsten Menke commented, "There was a lot of momentum in the gold market, which seems to have faded slightly at the moment." He suggested that recent US economic news has created headwinds for bullion prices.
Gold demand in India remained subdued, with record prices dampening retail purchasing activity. In China, bullion traded at a premium, reflecting mostly steady demand in anticipation of the Lunar New Year.
Meanwhile, reports from Iran indicate that protests have subsided since earlier in the week, which may have reduced the immediate demand for safe-haven assets.
In other precious metals markets, silver experienced a drop of 1.6% to $90.82 per ounce. Despite this decline, silver has maintained sufficient gains to end the week with a 13% increase, having reached an all-time high earlier in the week.
Menke further explained, "The silver market seemed very determined to reach the $100 per ounce threshold before moving lower again."
Platinum fell by 3.2% to $2,332.70 per ounce, and Palladium slid by 2.6% to $1,754.35. Palladium had recently hit a low and is heading for a weekly loss.