Bitcoin is fungible. 1BTC=1BTC. These are the protocol rules. You're not selling fresh mined coinbase BTC for more on a DEX than you are conjoin or random coins. I've never seen an example of this. I'll buy anyone's tainted coins (there's no such thing) for a discount. Fungibility is a mathematical reference. You're using it informally as a social reference outside the protocol for what governments try to enforce, because they have no authority in the enforcement of bearer assurances, where the protocol is the supreme court there.

If you look at the people who need privacy the most, you'll find they use bitcoin, mostly. This goes for darkweb marketplaces (mostly bitcoin volume, some exclusively bitcoin), ransomware (mostly bitcoin), cartels (mostly bitcoin), laundering (mostly bitcoin), journalists, privacy mail like proton, etc.

The privacy issue with bitcoin arrises when people use centralized exchanges, which is the vector that blockchain forensics lever, because they're useless without CEXs. But imagine a world where bitcoin has a robust circular economy, and with enough goods and services priced in bitcoin, using a CEX is unnecessary. Also imagine with more and more global users, the volume spikes, and the global data set is enormous.

What remains of the privacy problem is being solved on L2, where with Taproot channels and splicing, submarine swaps, etc, privacy overkill can be achieved, and it's going to be achieved in the background with no work required by the user.

Lastly, consider that protocol privacy and anonymity are meaningless for many transactions. If for example, you order something from Amazon or PizzaHut, you provide a shipping address; or if you pay insurance-utility-rent, it's linked to a name.