I agree with you. I think Bitcoin will coexist side by side normal currencies. Although it is still hard to imagine government actually allowing Bitcoin to mainstream. Unregulated nature of it can cause some issues.
I would like to go a bit deeper.
Bitcoin is essentially a descentralized trust system. What does it mean if I pay a Bitcoin to you? It means that I'm giving you a digitally-signed letter that says: "I am trusting you that you give me a product or service which, for me, has the same value as the actual price of a Bitcoin."
It isn't so much a currency, because a currency is meant to be a stable indicator of prices and for this reason it is backed by a state or another large entity.
But based on the Bitcoin/cryptocurrency system, a large part of the financial instruments needed by the economy can "go descentralized", because they are all needing this "trust" component Bitcoin provides. In many aspects this is much more efficient that the traditional banking system. Digital payments and savings accounts - basically, what Bitcoin Core provides you - are only a little part of the possible uses. Systems like the Bitcoin extension Counterparty, or "altcoins" like Nxt, Bitshares or Ethereum allow you to use cryptocurrency for other financial instruments like loans, stocks / assets, crowdfunding, and distinct types of financial contracts.
So for me it's a matter of time that these descentralized financial instruments increase the market share in the financial world. I don't know if it will replace it, but I am pretty sure cryptocurrencies will play a major role in 5-10 years, and it is useless that governments take action against it (they should even embrace it, if not autocratic).
It is possible, however, that in 30-50 years cryptocurrencies will be obsolete again.