This week, a set of new signals from U.S. stock research institutions, on-chain data platforms, and decentralized protocols has been twisted into a clear narrative: Jefferies has begun to quantitatively assess the erosion risk of stablecoins on bank deposits, Onchain Lens has captured the high-leverage games of whales on-chain, Aave has completed a liquidation of approximately 27 million dollars with zero bad debts for the protocol itself, and projects like Ranger Finance have been liquidated out amidst the cold scrutiny of the market. Behind this is the tug of traditional financial profits being gradually eroded and the accelerating expansion of the crypto market: Jefferies warns that 3%—5% of core deposits may be siphoned off, and a report from Northwestern Mutual indicates that 32% of American Gen Z prefers crypto assets, together with Bernstein’s target price of 190 dollars for Circle, outlining a new direction for capital reallocation. The question is no longer "Will it change," but rather who will truly reclaim asset pricing power in this long-term game between old and new finance.

Invisible Pressure from 3% to 5% Deposit Outflow Warning

● Gradual bloodletting rather than traditional bank runs: Jefferies emphasized in its latest report that dollar-denominated tokens like USDC will not trigger traditional bank run scenarios—there will be no long lines at the counters, but through continuous migration, the most valuable core deposits of banks will be gradually siphoned off. This "boiling frog" style of outflow resembles the passive reallocation of funds in daily payments, transactions, and on-chain settlements, making it difficult for banks to resolve with one-time crisis response mechanisms.

● 3%—5% deposit outflow reconstructing profit models: The report’s indicated 3% to 5% potential outflow range of core deposits seems mild, but it points directly to the key of net interest margin. Core deposits have low costs and high stability, serving as the key factor for banks to widen the gap between their funding costs and those of money market funds and capital markets; if this balance is cut by a few percentage points, the asset side must either be forced to lower risk appetite and reduce loan sizes, or can only retain deposits by raising fixed interest rates, hence squeezing the already narrowed net interest margin, putting long-term profit pressure on the traditional "raising deposits—providing loans—eating the spread" model.

● From payment tools to "digital certificates of deposit": As issuers like Circle expand their scale, dollar-denominated tokens once viewed as niche payment tools are evolving into a type of class "digital certificates of deposit" that can be redeemed at any time and earn income externally. Users can flow freely between exchanges and on-chain protocols, parking their assets in yield pools rather than bank accounts, and this high liquidity and high programmability characteristic creates a new channel between money market funds and traditional demand deposits, potentially replacing part of the role of bank liabilities.

● Redistribution of interests and regulatory entanglements: As funds migrate from bank balance sheets to token issuers and their custodians, the distribution of interest income and liquidity premium has to be rewritten. The interest differential income on government bonds and reverse repos for banks has been partially transferred to issuers, on-chain protocols, and custodial banks themselves; regulatory authorities need to balance payment system stability, monetary policy transmission, and innovation space. In the coming years, the game around reserve requirements, asset compositions, and regulatory exemptions among banks, issuers, and custodians may become the most critical redistribution negotiation within the financial system.

The Dual Narrative of Wall Street's New Favorite, Circle

● The optimistic signal released by the 190-dollar target price: Bernstein’s latest report gives Circle a 190-dollar target price, which not only reflects the valuation judgment of a single company but is also a collective bet on a new asset class of "crypto infrastructure stocks." For Wall Street, accustomed to reflecting expectations through stock prices, this means that crypto-related companies are no longer just cyclical trading targets but have been incorporated into long-term allocation baskets, becoming important constituents in the payment, clearing, and financial technology sectors.

● The growth story of stablecoins and AI-agent financial services: The report views “the increase in stablecoin adoption and AI-agent finance” as Circle’s new growth engine, clearly outlining the narrative framework of the capital market—one end is the liquidity infrastructure represented by USDC, and the other end is intelligent financial services carried by AI agents. The former is responsible for capturing the foundation of fund docking and cross-platform settlements, while the latter, through automated wealth management, intelligent hedging, and strategy execution, transforms this liquidity into higher-frequency, more granular income and data assets.

● Internal rifts: banks worry about deposits, while brokerages bet on growth: On the same street in Wall Street, commercial banks see the invisible outflow of 3%—5% core deposits in Jefferies' model, while investment banks and brokerages see the explosive growth potential of infrastructure companies like Circle in Bernstein's research report. This perspective difference reflects the structural division within traditional finance: institutions responsible for liabilities are more focused on deposits and regulatory red lines, while institutions responsible for buying and capital markets are more willing to embrace new profit pools and valuation premiums.

● AI-driven on-chain finance redefining the imagination space: When “AI-agent finance” integrates with on-chain settlement, an automated, always-on financial service layer is taking shape. AI agents can assess returns and risks in real-time, seamlessly migrating between exchanges, lending protocols, and on-chain liquidity pools; the settlement end is functionally undertaken by dollar-denominated tokens for value transmission and clearing roles. This combination not only challenges traditional retail banks’ wealth management and custody services but also suggests that the next profit high ground will emerge in algorithm-driven asset allocation, risk management, and cross-border payment integrations.

New Order Amidst Whale Leveraging and Aave's Welfare Cuts

● Leveraged profile of on-chain whales: According to Onchain Lens monitoring data, some whale addresses exhibit significantly increased activity in high-leverage trading on-chain, with their position structure showing high concentration, diversified collateral assets, frequent re-mortgaging, and other characteristics. Although the brief did not disclose specific identities, on-chain data suggests that these entities are more inclined to use a multi-protocol combination to raise overall leverage multiples, creating complex hedging structures between spot and derivatives markets, rapidly amplifying and transmitting market volatility and liquidation risks on-chain.

● The ripple effect of Aave's approximately 27 million dollar liquidation: Amid a round of intense market movements, approximately 27 million dollars of positions on Aave were collectively liquidated, leading to a sharp short-term price drop and emotional downturn in the market. Numerous leveraged positions were hit against the liquidation line in a short time, forming a chain of selling pressure, and liquidity for some long-tail assets became temporarily tight. For participants accustomed to the matching logic of centralized exchanges, this large-scale liquidation process, which is “visible across the entire chain and executed automatically,” vividly demonstrates the self-regulation of the DeFi system during high volatility.

● Zero bad debts and solvency of the protocol: Aave founder Stani.eth emphasized afterward that “the Aave protocol itself was not affected and generated no bad debts,” meaning that despite the severe impact on individual leveraged users, the overall collateralization rate and liquidation mechanisms of the protocol still adequately covered the risk exposure. Unlike the traditional financial path where “bad debts are covered by bank shareholders and taxpayers,” DeFi lending locks risks within voluntarily participating positions through over-collateralization and on-chain liquidation, ensuring that the solvency at the protocol level is not breached.

● The paradox of leveraged amplification and mechanism resilience: High-leverage trading and good liquidation mechanisms coexist within the same system, constituting the core paradox of DeFi. On the one hand, leverage amplifies price fluctuations and liquidation risks, rapidly spilling individual greed and panic into system-level volatility; on the other hand, tight liquidation logic and transparent collateral rules validate the resilience of the infrastructure with each “bloodbath.” Systemic risks in traditional finance often accumulate off-balance sheet, while on-chain risks are instantaneously released in visible forms, completing the rebalancing of order in pain.

Generation Z's Bet on Crypto: The Intergenerational Rift of Capital Migration

● 32% Migration of American Gen Z's asset preferences: A report from Northwestern Mutual shows that approximately 32% of American Gen Z prefer crypto assets, providing a micro-footnote to the macro narrative of "deposits being eroded." For young people born in the era of mobile internet and social media, token-denominated assets are already integrated into their daily lives, from tipping and in-game economies to cross-border remittances; they are more accustomed to completing value exchanges on-chain rather than queuing at bank branches.

● Return expectations, accessibility, and cultural identity: Compared to traditional savings, crypto assets offer higher nominal return expectations, lower entry thresholds, and stronger community cultural cohesion. Gen Z is not only chasing price increases but also participating in an identity recognition and technological experiment: through exchanges and on-chain protocols, they can engage in global liquidity pools with a very low threshold, rather than passively accepting the limited product menu provided by banks. This combination of “high volatility + high participation” makes them more willing to take risks and bet on a new financial order.

● The medium-term hollowing out of bank liabilities: As this new generation of capital migrates from traditional deposit accounts to exchange wallets and on-chain liquidity pools, the structure of bank liabilities will quietly be rewritten over the years. Young people should have become the most stable and growth-oriented source of deposits for the next several decades; instead, they are putting their first pot of gold directly into the crypto market and online brokerages, interrupting banks' logic of cultivating “lifetime customers”, and the liability cost curve may be forced to rise, thereby compressing the ability to provide long-term credit support to the real economy.

● The confluence of young retail and institutional capital: The earlier mentioned institutional bet on Circle and DeFi's resilience during liquidations has now formed a convergence with the capital migration of Gen Z—one end is “young retail” connecting to new financial infrastructure via exchanges and applications, while the other end is “institutional capital” occupying upstream entry through equity and debt investments. This two-way siege is reshaping the financial landscape: traditional banks are losing the next generation of customers on the retail side while being seized of growth premiums by new infrastructure companies on the capital market side.

From Polymarket to AI Surveillance: The Migration of Pricing Power

● Event pricing and public opinion mapping in prediction markets: Representative of prediction markets like Polymarket, they are playing an increasingly important role in event pricing and public opinion expression. Users can bet on real-life events surrounding elections, macro data, policy trends, etc., with prices reflecting collective expectations in continuous trading. Unlike traditional surveys based on sampling and questionnaires, this market based on real-world betting directly encodes participants' genuine beliefs and risk tolerance into price curves, providing a new tool for information aggregation for various entities.

● Co-performance of compliance and regulatory technology: As the scale of prediction markets expands, the trend of cooperation with compliance and regulatory technology is becoming increasingly evident, regulators are beginning to enter the on-chain gaming field with a “visible hand”. By monitoring trading behaviors, capital flows, and unusual patterns, regulatory tech tools can identify potential manipulation and illegal activities without completely stifling innovation. This “embedded regulation” is gradually leading prediction markets out of the gray area and into a financial experimental field that can be integrated into existing frameworks.

● Fusion of AI agents and market monitoring systems: When “AI-agent finance” combines with on-chain prediction markets and lending protocols, the manner of financial operation is rapidly becoming algorithmic. AI can not only automatically adjust betting combinations and risk exposures based on public data and historical performance but can also be deployed in market monitoring systems to identify abnormal trades and systemic risk clues in real-time. Matching, risk control, and governance are partially taken over by algorithms within this framework, shifting the human role more towards rule-making and parameter calibration.

● Price and compliance boundaries under multi-entity gaming: As bettors, platforms, regulators, and AI collectively participate in this system, the price discovery and compliance boundaries are being redrawn. Prices are no longer just the result of bullish and bearish views but also encompass a comprehensive reflection of regulatory expectations, algorithmic preferences, and rule constraints; while the definition of “compliance” is gradually shifting from post-event penalties to preemptive constraints and ongoing calibration in the process. The key question for the future is: In this multi-entity game, whoever holds the ultimate power to modify rules and shut switches will grasp the true pricing power and order-shaping capacity.

Project Liquidation and DAO Voting: The Norm of Life and Death in the Crypto World

Referencing cases like Ranger Finance, it can be observed that the crypto space is not only composed of growth myths and wealth stories but is also filled with failures, defaults, and forced exits. Insufficient funding, failing models, compliance risks, or internal governance failures can trigger projects to enter liquidation procedures within a short time, and investors and users often face cold asset disposal sheets rather than dignified soft landing narratives. These cases remind the market: in a high volatility and high innovation density environment, failure is the norm rather than the exception.

DAO governance is beginning to play an increasingly substantive role during project exits: how to decide the order of asset liquidation, the arrangement of creditor priorities, and the user compensation framework through on-chain voting has become a key indicator of a protocol's maturity. Token holders are no longer just participants in price games; they are also the creators of liquidation rules, making voting choices between returns and responsibilities, setting precedents for the governance of the next generation of protocols. Unlike traditional bankruptcy courts, the transparency and immediacy of on-chain governance expose all decisions and games to sunlight.

Returning to the main thread, from Jefferies' warning of 3%—5% erosion of core bank deposits to Aave undergoing stress tests during its 27 million dollar liquidation, to the exit of projects like Ranger Finance, new and old finance are reconstructing order through repeated conflicts: the migration on the liabilities side undermines the traditional advantages of banks, while innovations on the asset side continually experiment with new risk pricing and liquidation mechanisms on-chain. In the years to come, determining the outcome will not just depend on the fluctuations of any single market cycle, but on who can survive and iterate in the triple game of regulatory frameworks, technological evolution, and user trust—only those who grasp compliance thresholds, build resilient infrastructures, and earn dual trust from both Gen Z and institutional capital will have the qualification to write rules in the new financial landscape.

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