Option 1. Because bitcoin is made to be in the hands of people, if something like 95% is in custodians it probably failed somewhere and it can all be seized like gold. Self custody and transact p2p.
Discussion
The problem is that Bitcoin, as it is right now, isn’t able to scale enough for the majority to use it in a self sovereign way for p2p transactions. Also not with Lightning.
This is going to be a hard problem to solve.