There is plenty of marketshare that will buy Bitcoin for plenty of other reasons (store of value, protection from governments, criminal transactions, etc.), such that a lot of those reasons would have to be painfully clear to a majority of capital for it to go down dramatically (e.g. LUNA-style). What is clear to one of us may not be clear to other market participants.
Case in point: look at Gamestop stock, 15 months later. Still detached from reality, despite nobody -- even the buyers -- truly expecting the company to generate commensurate value.
You are somewhat correct in that yes most crypto is not private. However this isnt a binary state, often pseudo-anonymity (which most crypto can do) is sufficient.
Except to a well informed person with the proper tools, its difficult to follow even relatively basic transactions more than a few hops. How many of these kind of people do we think are employed by the IRS?
Even the FBI have been famously bad at tracking criminal funds, and they do have the expertise and tools.
It may not need to be that private. For example, a Chinese corrupt official can move his funds to the US by converting them to BTC and fleeing to the US to withdraw them. The Chinese government can track it down after all that happens but can do nothing due to a lack of extradition treaty.
Case in point: look at Gamestop stock, 15 months later. Still detached from reality, despite nobody -- even the buyers -- truly expecting the company to generate commensurate value.