2. Different crypto currencies have different roles. If you want to avoid traceability altogether, use zCash.
The number of transactions that needed to be investigated would be a small percentage of the total, and possibly traceable through means other than cracking keys.
2) Regardless of whatever zCash is, my point is that Bitcoin's immutable and complete ledger lends itself to complete surveillance. The math may be uncrackable, but the users are not, and privacy would go out the window if they're forced to transact with registered IDs.
It's prohibitively expensive precisely because being forced to transact with registered IDs is going to be less and less of a requirement moving forward. With DeFi exchanges, we'll see more transactions that stay out of state surveillance.
You're correct that BTC isn't ideal for privacy though. That's why zCash and Monero will also be important currencies.
Japanese exchanges and service providers, for example, are not allowed to touch them.
Blockchain is a public ledger of every Bitcoin transaction ever. It's trivial to track these things. It's trivial to identify downstream coins from upstream illegal activity. Far easier than with traditional currency.
The exchanges will play ball because they want to continue exchanging (making money). The Bitcoin hodlers will play ball because it makes their investment more legitimate and reduces the supply of coins, increasing the value of their stash.
But if you want to get money back out of the system or spend that money on anything, it has to go through an exchange located in your jurisdiction.
Also, watch out for the services that claim to deliver abnormally high interest on crypto investments. There's no free lunch.