There is a clear and present danger that ethereum will usurp bitcoin as the number 1 coin, in terms of market cap. I am of the opinion that if this happens, bitcoin will slowly fade away into insignificance. [...] I don't know if or how it can happen, but my opinion right now is that bitcoin developers must find ways to deflate the erc-20 bubble, or bitcoin will lose prominence at a rapid rate of knots.
And I absolutely don't see why you think that "now" the danger of Ethereum surpassing BTC is bigger than let's say in 2017/18 when the ERC-20 bubble started and everybody was talking about a "flippening". And finally: Even if a flippening occurs - Ethereum is a completely different asset class, a mostly centralized enterprise platform. Its public is very different from BItcoin's.
I can however understand your reasoning a bit. I am for example interested in contracts resembling options or futures for Bitcoin. If something like "DeFi" can be replicated on BTC in a totally decentralized way, I think Bitcoin could profit inmensely from it, as we could mitigate risks associated to volatility on the platform itself. I am also interested in smart property, which is similar to NFTs.
However, Ordinals is not the technology I see as appropiate for that. Ordinals is a cheap hack, and BRC-20 tokens are extremely inefficient when compared even to old token standards like EPOBC and Counterparty. See below for RGB, a technology which I see most promising. I think all "token", "smart contract" and "DeFi" standards should support second layers, like Lightning and sidechains, to avoid cluttering the main chain. And RGB does that.
I think you misunderstand the whitepaper. No part in the whitepaper says that tokens should not be possible on Bitcoin. There are tons of technologies built "on top" of Satoshi's original technology, not only token platforms (like mentioned 3 posts above) but also Lightning, atomic swaps and other interesting contracts.
My personal opinion: Sell your BRC-20, if you still can
This is NOT the complete list of tokens, but only the list of token standards based on Ordinals. There are many, many more!
The most modern standard is probably RGB, which uses lots of advanced cryptography, it's however afaik still not stable, that means that the final version may not be 100% compatible with now, but it's coming closer. It supports Lightning out of the box.