Bitcoin like any transparent/traceable system is a social credit system. If you can not see this, wait a little while longer maybe next year or the year after you'll get it.
Discussion
Are you saying the units on it are not sufficiently fungible to be considered money? Or something else?
Absolutely. BTC was quite fungible in its early days. Also you could always checkout your trade partners address. That's also when Bitcoin took off in Silkroad.
Then Bitcoin got listed on CEX and states demanded KYC which started to deanomyse the chain retroactively.
Nowadays 99% of people come into BTC via KYC (and IOUs). Which gradually increases the amount of known UTXO.
Fungibility is a hard property for money. It's either granted by law (cash) by it's material properties (gold) or mathematical enforceable (privacycoins).
KYC/AML is meant to transform money (be it Bitcoin or fiat bank accounts) into social credit, which by definition doesn't have the properties to work as neutral medium of exchange.
It's impossible to get the entire network onboard with that though, much like it is possible to stamp and track some gold, but not all gold. You're also not counting the bitcoin treasury companies which are creating credit systems with actual credit (not bitcoin) backed by the bitcoin and each entity tracked and registered so that investors can choose which firm to invest in with a high degree of transparency. The ability to track the funds is a feature. Your argument leaves the door open for a large subset of the UTXOs being fully fungible and private, namely paranoid cryptoanarchists like us. Bitcoin is useful for creating a highly transparent credit system, but it is not going to be turned into a single centralized social credit system. A fork of it might be, unfortunately, but there will always be that escape hatch for libertarian radicals who just won't give up.