Totally understandable…
First off, since you’re running on a local environment: If you’re on dfx 0.10.0, dfx ledger fabricate-cycles is meant for that very situation. Anyways, you asked about deposit-cycles.
The error message is bad/outdated. I’ll update it in this PR. The new error message will be The deposit cycles call needs to proxied via the wallet canister. Please run this command using 'dfx canister --wallet <your wallet id> deposit-cycles <other arguments>'.
If you look closely, you put the wallet flag as part of the deposit-cycles subcommand, and not as part of the canister command. dfx does expect it to be dfx canister --wallet <your wallet> and only AFTER that the deposit-cycles <other args>.
dfx should accept the wallet flag anywhere, no question. I’ll note it in our backlog.