>If anything, it is more traceable and public than physical cash.

That's true, but cash has its own set of limitations. Using cash to transfer large sums of money in not very convenient and good luck explaining to the border police why you have $20 million in cash with you. Spending and laundering large amounts of cash without raising suspicions is also pretty difficult.

>But when you do associate a person with a given key,

s/when/if/

>that association probably persists over time.

How so when you can generate a virtually infinite number of new addresses whenever you like and the current practice is to avoid reusing the same address if at all possible?

Sure if I buy some drugs in BTC and then I see that some money transits directly from the destination address to the known address of some politician then I know that something fishy is going on.

But if the money is then split and merged to a bunch of different addresses, then moved to an exchange in china where it's converted to LiteCoins, then put through a coin mixer, then moved to an exchange in Brazil where it's converted back to Bitcoins then I wish good luck to the IRS employees.

And you can do all of that from the comfort of your home in an afternoon, through TOR, without having to reveal your identity to any 3rd party.