Well they could become an integral part, so nothing wrong with that. However it would not be bitcoin. The projects who actually work with financial institutions

Well they could become an integral part, so nothing wrong with that. However it would not be bitcoin. The projects who actually work with financial institutions have one thing in common, they dont use PoW. You can read it every day, most powerful people talk bad about bitcoin and some even endorse other cryptos. Deflation on its own is not a problem. Gold is deflationary too that does not cause a depression. It did once but because of the connection between gold and money (fiat). Now days if there would be a gold bubble, the central banks hold most of it and could simply dump the price by selling some. They can buy back with printed money and sell higher to crash it and repeat while unofficially "inform" the right people to short it. As long as the printed fiat still is widely accepted they can fight any deflation bubble from any asset with it. Its the whole point of central banks. They play outside of the rules of all other financial institution with the sole goal to manipulate the market into being somewhat stable. It doesn't really matter that gold would not go to zero and probably even would make a new ATH some yeas later. Busting the bubble is enough of a fix for many many years until the next bubble comes. Its still deflationary but most people dont think in decades and more.