This is news to me. I’m not super informed regarding cryptocurrencies, but it seems like this would also affect erc-20 “fungible” tokens on Ethereum, wouldn’t it? Do such tokens not also have traceable histories?
For Bitcoin these are UTXOs which are easy to trace, but not so for Ethereum and its tokens which just rely on accounting not UTXOs. Right?
No.
> Let's say I send you $100 USDT and Osama Bin Laden sends you $100 USDT. Then you send Justin Beiber $100 USDT and keep the remaining $100 USDT.
That's a misconception, you can do that exact same thing with Bitcoin and you are left with the same question. Bitcoin outputs can be combined into a single output (and they routinely are). See this diagram: http://syskall.com/bitcoin-notes/svg/transaction.svg
Even Ethereum's rationale acknowledges that Bitcoin's UTXO model provides a higher degree of privacy: https://eth.wiki/fundamentals/design-rationale