I would say the relationship is this one:

First, Ethereum was found to be the perfect Ponzi scheme platform by dubious “ICO“ initiators.

Then, early investors made a huge bunch of money on these ICOs.

Then the price skyrocketed, as more people wanted some of that easy ICO money.

This in turn made the mixing services insanely popular, as all of those ICOs had to cash out, and knowing that their business was of dubious nature, many decided to obfuscate the target addresses of their ether via mixers to protect either OTC buyers or their personal accounts on exchanges from being linked with the ICO addresses.

I would say it is not actually a mixer. The point you are making actually points more towards them being temp addresses for exchanges. More people entering the market on exchanges, higher volume in exchanges, higher volume in this tempwallet "mixer"

If the transactions are just going to the deposit addresses that exchanges shuffle around, than it's possible that 67% of ETH activity as of late is tied to people sending to and from exchanges.

Doesn't this screw up people's taxes, making them liable for realised capital gains, and also making them completely screwed if the value of the currency goes back down again

You are only liable for CGT if you sell an asset (= realised gain).

So, if you buy a stock at $10 and it goes up to $100, your CGT liability is a certain percentage of $90 ($100 - $10) upon liquidation.

If you buy a stock at $100 and it goes down to $10, you end up with a $90 (generally carry forward, some jurisdictions allow carry backwards) loss that can be used to offset other gains.

yes - but isn't that what's essentially happening here when you run your coin thru a mixer and mix it with other coin (which must have the same value) - you sell your coin and get back a new one with today's value - voila a taxable event ....

I would assume you would argue that you merely moved money (or assets) around, just like you would wire money from A to B. Moving stocks with unrealised gains from broker A to B is also not taxable.

The only person you would ever have that conversation with would be the IRS (or your local tax authority outside of the US), and they are bound by confidentially.

yes but that act of mixing your coin with others effectively gives you back mostly other people's coins .... what's their value if not today's value?

If I go get change for $10,000 in $100 bills and ask for all $1's do I realize 10,000 dollars in capital gains because those are "other people's dollars"

but they're dollar bills, the currency we pay taxes in, they're always worth $10k no matter what happens to their actual intrinsic value ... a better example is:

I buy 10oz of gold for $1000 (this was a while ago), this week I exchange my gold for a different 10oz of gold (less a small commission to the exchange) currently worth $10,000 - is that a taxable transaction? I suspect yes