We are in agreement on the crypto split between illicit and mainstream activities, and your points are well supported by the history of monero/XMR--it can't be bought with card or bank transfer on any of the major exchanges, and has been insulated from the volatility and inflation of the more mainstream coins. So in a sense the outcome you're describing has already come to pass, in a small section of the market.

Where we disagree is the criminalization of cryptocurrency transactions to achieve that end. Owning, buying, and selling monero isn't illegal; regulations of some type (I am not aware of the exact structure) have prevented it from being touched by institutional players, but the risk of a private citizen getting caught in some sort of spike trap designed to eliminate reckless speculation and fraud on an institutional level is zero.

I agree 100% that there's a major bubble in cryptocurrency, the popping of which will happen in manner that is novel and unknown, but "make it illegal" means cops and guns, full stop. I (and I suspect many of the people who replied to you) see that option as a last resort, and totally inappropriate in the case of free exchange of innocuous assets between private individuals.