No it's not. It's worth a bit less than face value, but you can cash it out by swapping to other cryptos.
To you, you might be trying to break your link with a Bitcoin mixer by wrapping those bitcoins and uniswapping them for a different asset on Ethereum.
To me, I simply went to Uniswap and bought some wrapped bitcoins, then deposited them on a traditional exchange.
Given the limitless number of cryptocurrencies coupled with the limitless number of exchanges, there will always be some series of hops that someone can make between cryptos such that by the end, there is no amount of algorithmic analysis your exchange can perform that will automatically connect the coins and block them. Manual intervention would be required, by a privileged law enforcement expert who is personally tracking that value across novel and disparate networks using domain-specific knowledge.
Nope. It's impossible to cash out a tainted bitcoin since it cannot be deposited at exchanges. Its value is essentially zero.
> How's 1 BTC is not fungible [to another BTC] unless you're wanna hide your bitcoin transaction history?
Every bitcoin can be distinguished by its transaction history. If you try to use a mixing service, that fact will be known and the resulting bitcoins will be tainted. Exchanges will assume they are laundered funds.