If large Govts bought all available bitcoins in an effort to wreck BTC it would be a drop in the bucket for them. ( and the Fed would only need to print the $ to do it) They would also be in a position to manipulate the market.
Furthermore if they embarked on mining using their massive resources it would probably push ALL small miners out of business.
Therefore BTC can not be regarded as a serious threat to their currency monopoly, merely an interesting diversion for the powers that rule the markets
That isn't the way economics works.
As they but up more and more, the bitcoins become rarer and rarer. As such the cost of each bitcoin becomes higher and higher. Eventually, they'll be paying a billion dollars a bitcoin. Meanwhile, as everyone sees the price shooting up, they all start buying bitcoins as well, making it more difficult for the government to buy them all since other people are also buying. As the government starts printing massive amounts of dollars to purchase the bitcoins, the economy is hit with massive inflation (dollars are no longer worth as much as they were because there are so many more of them. This makes the exchange rate between dollars and bitcoins grow even more, and drives more people to want to have bitcoins to avoid losing purchasing power to the massive inflation of the dollar. The government destroys their own currency and drives their citizens to adopt bitcoins far faster than they otherwise would have.