Well 3.5% is certainly having an effect.
Central governments (and some citizens) generally are averse to things they can't control and regulate easily so what we're seeing is a reaction along those lines. China being who and what they are means they will probably be the first to try to push this out of existence and will do so with the most over the top reaction.
We may see some of the same type of over the top attacks on it in the west as well eventually. Hard to say what/when will happen. Regardless, none of it is going to be good for adoption or value of the market.
I don't think it is possible to completely drive it out of existence but it can be marginalized to the point of forever remaining a tiny niche where only criminals trade in it because the mere act of owning, trading, or mining it makes you a criminal.
Needless to say, I'm not a fan, but I'm just a little drop in the ocean.