Central banks could easily destroy Bitcoin: buy up a lot (billions-worth) and simply destroy the wallets. Basically: buy them up and not use them. Yeah, buying them up requires a lot of money to invest. But: could anyone reallocate the "lost" coins?
When you remove a significant supply of something from existence what does that do to the value of the remaining supply when the demand is unchanged?
Yeah, I know what you're suggesting: that the price of 1 BTC would increase if someone removed a "chunk". Market cap would decrease and the price would skyrocket. So, people would still continue using Bitcoin, but as fractions: 0.0001 etc. Still, they could buy it all up gradually and destroy the coins... Currently the market cap is 32 billion. Well, that's too huge, so not even the US could afford to just "waste" that much money... But major banks could team up (Goldman Sachs + the Fed + a few more) and they could start investing as well. And after a while they could dominate the market, holding the biggest quantity of Bitcoins. Like, if they bought up 50 % of the market, that would be huge. Then, they'd just buy something else with the Bitcoins: like buy the fiat money back - basically putting the money in the other pocket now (vice-versa)... I don't know, but I think there's a possibility of manipulation.
The playbook is to make it illegal. Same tactic as the "war on cash". Then steal the tech and make a block chain to be controlled and managed by the existing financial establishment (a.k.a. Ripple) so that bitcoin has no real competitive advantage (high transaction speed and low fees) and would force bitcoin underground - only to be used in the black market by criminals. Not saying it will work 100% but it probably only needs to work 95% The answer to this is to use other blockchain based digital assets and tokens as currency/store of wealth, without it being explicitly obvious that's what they're being used for. Hello ETH!