Governments or at least the two richest ones (US and China) have significantly more money at their disposal than there are bitcoins in total. US with its form of democracy may have a hard time to pull this off, but China can do this VERY easily if they choose to.
This will be a multi-pronged attack:
The first stage to doing this will obviously be to make owning, mining or trading in crypto-currencies illegal. This would get all the regular people off the system and we'll only be left with the criminals. Now we can fuck them up.
1. The first thing to do would be to start buying and holding bitcoins.... TONS OF IT. With its current resources, China could buy all the bitcoins in existence and not even care (Not that they need to buy them all). Then once the market is right, dump it all in to sell. This will drive the value of Bitcoin to the Ground. The real reason why Bitcoins are so valuable right now is because it is used to hoard money. People hold bitcoins and usually don't trade them for money. A sudden surge in supply will hurt it bad. 207
And seeing the value go down will make people nervous and may even have a cascade effect.
2. The second part will be much difficult and may even involve a bit of sci-fi. Bitcoins come into existence from what we call mining. And mining is nothing but the act of maintaining a ledger. Millions of miners worldwide use their computing power to try and be the first one to finish a block. To finish a block, one needs to record all the given transactions into the block, and then add a value to it such that the hash of the block contains a given number of zeros in the beginning. This task is VERY difficult and takes massive computational capabilities. A country could try using its own supercomputers and other infrastructure, optimise it and beat all the miners thereby driving the mining industry to the ground. This is easier said than done because most mining pools have mind-boggling computational power. One way to surely beat them all will be to use (sci fi) Quantum Computing to calculate the hashes instantly. This would give you the power to mess up the entire system and add in ANY transaction you want. You can now start stealing people's money and force them off. 824