"If Bitcoin somehow did become an alternative world currency and USD was out of the running, wouldn’t that create great incentive for China to crash Bitcoin prices and drive everyone to use their national currency?"
It would, but there's no guarantee that if people left Bitcoin they would end up in RMB. More likely they'd jump to another cryptocurrency, or to Euros. People tend to distrust the last party that fucked them over.
I could see a dangerous situation if China let Bitcoin thrive for a generation, let all the other currencies wither on the vine through normal market mechanisms, and then decided to exercise their national control over Bitcoin. That's basically the Amazon strategy - make your product so appealing that all the other retailers go bankrupt, and then jack up prices once there's no alternative and a whole generation assumes you're the normal way to buy things. (Come to think of it, that's kinda the U.S. dollar strategy now.) But that's a generation off, so naturally I'm not thinking of it, and I doubt very many others outside of HN are either.
It would, but there's no guarantee that if people left Bitcoin they would end up in RMB. More likely they'd jump to another cryptocurrency, or to Euros. People tend to distrust the last party that fucked them over.
I could see a dangerous situation if China let Bitcoin thrive for a generation, let all the other currencies wither on the vine through normal market mechanisms, and then decided to exercise their national control over Bitcoin. That's basically the Amazon strategy - make your product so appealing that all the other retailers go bankrupt, and then jack up prices once there's no alternative and a whole generation assumes you're the normal way to buy things. (Come to think of it, that's kinda the U.S. dollar strategy now.) But that's a generation off, so naturally I'm not thinking of it, and I doubt very many others outside of HN are either.