Also, wouldn't we be able to restore everyone's wallets from the latest snapshot on a new blockchain?
This is different from finding out someone's password or even password + MFA on a centralized service, say Gmail. There, Google and/or the court systems step in, ascertain the legitimate owner, reset the credentials to the account, and give only the legitimate owner access.
There is no way to do this in Bitcoin, by design. Even if the US Supreme Court decided that you are the only legitimate owner of this wallet, there would be no way to prevent someone else who knows the private key from moving "your" Bitcoin. Of course, they could be punished for this, in principle, but it would be impossible to prevent it from happening.
It would only be useful for the wallets with known public keys. That's mainly old bitcoins, new ones only have its hash written to the chain.
This would certainly crash the price, but not to zero.
> Also, wouldn't we be able to restore everyone's wallets from the latest snapshot on a new blockchain?
Yes, but what good will it do you if the private key is leaked?
So I can see how you could pull it off before the price tanked, and even then, it's not a given that it'd go to zero. Just because a powerful actor can compromise your Bitcoin wallet doesn't _necessarily_ make it completely worthless -- just look at all the chains that are trivial to 51% attack which are still chugging along with small valuations. The price probably would collapse though.
Of course the market would just sink in the years leading up to that threshold, in anticipation of this (assuming no mitigation in this case).
For the second, it would depend on easy/hard it is to mine to get to the point where you can replicate a snapshot, and how easy/hard it is to continue mining on from that point. It is very unlikely the new protocol will hold the same value as BTC would have had.
Most likely this will be wielded by USA or China in secret (if not being done already)