I think not, fiat money will never be replaced by bitcoin.
because it is the tool we use for the current exchange, bitcoin is more suitable for the investment tool.
I agree with the opinion you convey and in my opinion the government will later adopt an economic system that is used for crypto currencies and may be used to make fiat currencies develop along with technological developments
If crypto will be popular in the future, the government can make their own crypto, and people will use it, and I think it's more like an stable coin. The government knows crypto, but they don't want people to get anonymous in using it, they like to monitor us people, so they would not allow that we will be using bitcoin or other popular crypto as that would defeat their purpose.