Encrypted funds shifting to AI stocks? Curve founder: This is rotation, not a structural decline

On June 5, 2026, Curve founder Michael Egorov explicitly responded to the current market's widespread pessimism toward the crypto industry. He pointed out that the significant pressure on crypto assets is not due to deteriorating fundamentals but rather a phase shift in capital preferences—AI stocks have become the main market focus. This judgment aligns with several recent independent market studies.

Wintermute's analysis report in early 2026 observed that despite overall global liquidity expansion and major central banks entering a rate-cutting cycle, new capital has not significantly flowed into the crypto market but has flooded into the stock market, especially AI-related sectors. The shift in institutional capital allocation behavior has exerted sustained short-term pressure on crypto asset prices.

Egorov's core view is that the current predicament of the crypto industry is a "capital rotation" rather than a "structural decline." Capital rotation is a normal cyclical phenomenon in financial markets and does not mean that the asset classes being rotated out have lost their long-term value foundation. Judging whether the crypto industry is truly in decline requires distinguishing between short-term capital flows and the pace of underlying infrastructure development—two different indicators.

What fundamental truths do institutional data reveal

Egorov highlights a fact often masked by market sentiment: institutions are adopting infrastructure without cumbersome intermediaries, and from a fundamental perspective, the crypto industry is in a better state than before. This assessment needs to be validated over the timeline of institutional adoption.

Looking at Curve's own data, in 2025, the protocol's average TVL grew from about $2.86 billion to approximately $3.05 billion, and total annual trading volume increased from about $119 billion to $126 billion. More critically, structural changes are evident in evolving usage patterns: lending-related transaction volume surged from 234k to over 421k, and total protocol interaction transactions doubled from 11.8 million to over 25.2 million. These figures indicate that Curve's usage frequency and functional depth as DeFi infrastructure are increasing, not just passively accumulating TVL.

On a broader industry level, multiple research institutions' early 2026 reports point in the same direction. Stablecoins are no longer just a unit of account in crypto markets but are widely discussed as a settlement layer for global payments; RWA assets have moved beyond pilot phases to become composable financial instruments within DeFi. These trends are not products of short-term speculative sentiment but signals of long-cycle evolution in financial infrastructure.

Will the AI industry experience its own "Death Valley"?

When comparing AI and crypto, Egorov introduces a key concept—the "Death Valley." He notes that while AI is a foundational technology, it will also go through its own "Death Valley," a phase that crypto experienced years ago.

This judgment is based on the logic that any emerging technology undergoes a transition from early hype to mature application, during which expectations are corrected by reality. Egorov further explains from a systemic perspective the deep challenges AI faces: replacing humans with AI can lead to AI outputs entering an AI input loop, causing quality to decline, while maintaining such a system's costs will grow exponentially. Large companies pushing AI to be ubiquitous may also misuse AI, potentially reporting inflated expenses.

Market data shows a clear divergence since Q3 2025: capital flows into crypto and AI stocks differ markedly. By the end of May 2026, the US spot Bitcoin ETF experienced a continuous outflow, with about $2.43 billion leaving in May alone. Meanwhile, market analysis indicates ongoing capital increases in AI and semiconductor stocks. However, Egorov's view warns market participants to be aware of a possible overlooked risk: the crypto market has already faced the "Death Valley," while the AI sector may not have fully emerged from it yet.

What is the fundamental relationship between crypto technology and AI?

Understanding the relationship between crypto and AI requires first clarifying their technical attributes and functional boundaries. Egorov emphasizes that both are foundational technologies but are not the same and are not inherently competitive.

Crypto technology addresses core issues of ownership, transfer, and proof of value—enabling value rights and transfers without relying on trusted third parties. AI technology tackles information processing, generation, and decision-making—extracting patterns from large datasets, assisting judgment, or automating tasks. They operate on different layers of the financial system. Crypto provides the settlement and security layer, while AI optimizes decision-making and efficiency layers, not replacing each other.

This distinction helps reframe the popular "crypto vs AI" narrative. Positioning crypto and AI as opposites confuses two different dimensions of technological innovation. Financial system evolution requires both reliable value transfer infrastructure and efficient information processing—complementary, not substitutive.

What is the logic behind capital flowing from crypto to AI?

The shift in capital preferences has an internal logic. Wintermute's report indicates that capital flows into AI and stocks because these sectors have clearer near-term profit expectations and visible development pipelines. For example, NVIDIA's Q4 2025 revenue reached $81.62 billion, up 85.2% year-over-year, and announced an $80 billion share buyback plan. These concrete, quantifiable cash flows are naturally attractive amid macroeconomic volatility.

Meanwhile, crypto faces tightening capital inflow channels. As of late May 2026, the US spot Bitcoin ETF experienced nine consecutive days of net outflows, totaling about $2.8 billion—the longest outflow period since its launch in January 2024. Digital asset investment products also saw about $1.47 billion in net outflows in the week ending May 26, 2026.

However, capital rotation is not unidirectional or irreversible. The drivers behind the flow into AI include a pursuit of short-term profitability visibility. When AI sector valuations expand sufficiently or new application breakthroughs emerge in crypto infrastructure, the structural conditions for capital to flow back will gradually mature.

How to verify the positioning of crypto as financial infrastructure

Egorov repeatedly emphasizes a core proposition: "Crypto is the future of finance." Validating this requires examining key attributes of financial infrastructure—reliability, accessibility, and interoperability.

Reliability-wise, Curve's crvUSD stablecoin system and lending mechanisms have operated for years, surviving multiple extreme market shocks and liquidity crises. In 2025, Curve's share of Ethereum DEX fees grew from 1.6% at the start of the year to 44% in December, a 27.5-fold increase. This growth reflects Curve's evolution as a shared infrastructure for stablecoin liquidity, lending, and emerging use cases, not reliance on a single product.

In terms of accessibility, crypto finance has achieved true borderless, permissionless financial services. Any user with a crypto wallet, regardless of jurisdiction, can access liquidity and lending markets at any time without waiting for bank hours or undergoing KYC. This feature is invaluable in cross-border payments, unbanked populations, and emergency liquidity scenarios.

Regarding interoperability, crypto infrastructure is increasingly connecting with traditional finance. By late 2025, Curve's FXSwap introduced on-chain foreign exchange markets, initially targeting Swiss franc, Brazilian real, and Indonesian rupiah. Although early-stage, this points to a long-term trend: crypto infrastructure becoming a bridge between traditional assets and digital finance, not a replacement.

What do Egorov's statements imply for market expectations?

Egorov's public statements send signals on two levels. First, an internal industry signal: core builders in crypto are not passively waiting for a market rebound but are continuously strengthening foundational infrastructure. Egorov has previously emphasized that DeFi must abandon token inflation and issuance-driven growth models in favor of sustainable models supported by real revenue. Between August 2025 and February 2026, DeFi's total TVL declined by about 38%, from roughly $158 billion to $98 billion. This decline reflects the retreat of "high subsidies for growth" rather than the disappearance of crypto infrastructure value.

Second, a signal for market expectation calibration: when the market focuses heavily on short-term price volatility and capital flow shifts, Egorov's remarks remind participants to view crypto development over a longer horizon. The value of financial infrastructure should not be judged solely by short-term capital flows, especially when it has not yet been widely adopted by the real economy.

While current capital pressures on crypto are real, they mainly reflect short-term shifts in capital preferences rather than a fundamental industry breakdown. Egorov's statements provide an internal benchmark: even amid bearish market sentiment, builders continue advancing infrastructure at the forefront.

Summary

The current downturn in the crypto market is not due to worsening fundamentals but results from short-term capital rotation into sectors like AI stocks with clear profit expectations. Egorov explicitly states that crypto is not a "toy" but a financial track providing sovereignty and 24/7 operation for users; AI and crypto are both foundational technologies, not competitors.

Data from Curve shows growth in lending volume, total transactions, and protocol interactions, indicating ongoing institutional adoption. While AI stocks are absorbing significant new capital, the AI industry itself will face its own "Death Valley." The crypto industry has already endured and emerged from this phase in recent years, with its role as financial infrastructure gradually validated through stablecoins, RWA tokenization, and on-chain FX applications. Capital rotation is a normal market phenomenon—it shifts short-term allocations but does not undermine the long-term value of underlying infrastructure.

FAQ

Q1: What exactly does Egorov mean by "Death Valley"?

"Death Valley" refers to the transition phase where emerging technologies' expectations are corrected from hype to practical application. Crypto experienced this in 2022–2023, with many projects lacking real use cases being淘汰. Egorov believes AI will undergo a similar process, facing intrinsic challenges like declining output quality and exponentially rising operational costs.

Q2: How did Curve perform in 2025?

According to Curve's annual review, in 2025, the protocol's average TVL increased from about $2.86 billion to roughly $3.05 billion, and total trading volume from about $119 billion to $126 billion. More notably, lending transaction volume surged from 234k to over 421k, and total protocol interaction transactions doubled from 11.8 million to over 25.2 million.

Q3: How long will the capital flow from crypto to AI last?

The duration depends on AI sector valuation levels, new application breakthroughs in crypto infrastructure, and macro liquidity conditions. Institutions like Wintermute believe that once AI capital rotation stabilizes, crypto assets may regain investor attention.

Q4: How does crypto serve as "financial infrastructure"?

Mainly in three dimensions: 24/7 operation without reliance on banks or intermediaries; permissionless, sovereign financial services accessible to any user; and integration with the real economy via stablecoins, RWA tokenization, and on-chain FX.

Q5: What are the asset price data sources used in this article?

All crypto asset prices are sourced from Gate.io market data as of June 5, 2026, with prices in USD. NVDA stock price is based on public market data, trading at $218.66 USD as of June 5, 2026.