Government are only be able to build centralized platform where your portfolio are controlled, minimum and maximum amount of withdrawals are imposed on your assets, kyc verifications are occurred for their own benefits and many more but at the end every waves of transaction are reflected onchain for public awareness, thats what government is not happy with, thats their point of weakness.
You underestimate the government to what extent they can go and what they can do. Currently, they have great influence in pushing a narrative on how they want institutional investors to interact with Bitcoin. They are also now fully involved in acquiring and holding larger portions of Bitcoin.
You talk about how they can influence the price to go up, but their power doesn't just stop there. They can also, without stress, control and manipulate the market to react positively, and what you call a win-win for all will affect few. That's about price, but on a serious note, the government, as I see it, is interested in making a profit from Bitcoin, but that's not their major concern, especially the US government.
They don't like what they can't control, and Bitcoin's censorship resistance is what they don't like and have been pushing the narrative of looking for a way to make censorship possible. If everyone is quiet and focuses only on what they are doing with price, it will get to a time where they will have to decide for miners situated in their land what to process and what not to process, and when it gets to that point, is Bitcoin still considered to be completely decentralized?