Mainstream bitcoin adoption is a massive threat for bitcoin, if done wrong. Adoption at all cost is a terrible idea and could lead to a dark path where only very few people hold their own keys and verify transactions.

Today, most people hold paper bitcoin, which are IOUs on exchanges and custodians. And soon ETF shares, maybe? This has the potential to drastically increase the popularity of the "Bitcoin" brand, and perhaps its market cap, but defeats the purpose of bitcoin itself: censorship-resistance and sovereignty. How much paper bitcoin it out there right now? Not sure, but probably way more than 21 million units. Almost impossible to verify.

Paper bitcoin can not only suppress spot price for many years (creating fake supply), but also fracture bitcoin usage. On one hand, you may have a network of regulated financial institutions providing custodial bitcoin financial services (brokers, exchanges, lenders, etc.). Currently, they are being referred to as DASPs, VASPs or CASPs. Self-custody for clients of these businesses may gradually be removed for fully custodial services like we are seeing with proposals in the MiCA regulation in the EU. Considering most people care about price exposure, push back may be minor. Also businesses may feel incentivized to profit from fractional reserve banking, even if it is a very risky proposition on bitcoin. But if people cannot redeem bitcoin IOUs on most regulated businesses, then the risk of bank runs could be mitigated. At least, that would be the narrative.

On the other hand, you will have P2P black market usage of bitcoin with people running their own nodes, doing coinjoins and holding their own keys. Fracturing bitcoin could be a worst case scenario where the "regulated way" of using bitcoin may not allow bitcoiners to use the most popular on/off ramps, marginalizing true bitcoin holders who control their keys and run the full nodes.

I wrote a bit on that for Bitcoin Magazine, so curious to hear critics of that view: https://bitcoinmagazine.com/culture/regulations-and-two-tiered-bitcoin-economy