If they play rehypothecation games, they will eventually be blown away. 
On sovereign use case of #bitcoin people will automatically gravitate towards more easy to use services. 

 How so? Fractional reserve banking is already rampant, and there's nothing I can see about Bitcoin that will make that stop. 

 Try to short a deflationary asset, which is traded 24/7 globally, which is easy to self custody. 

 What that have to do with fractional reserve lending? If anything, that practice is more profitable with a deflationary asset