Note that it's no different from ATMs with a $500 per day limit.

We can have a broader discussion about physical security, but it's clear this isn't a problem that's unique to bitcoin at all. In fact, bitcoin allows anyone to configure their security according to their own risk profile, and retain full financial privacy in their ordinary lives.

I'm not saying it's a perfect world with bitcoin and that you're fully secure against overwhelming physical intimidation and force, but as I mentioned in another comment, acting like this is a unique problem to bitcoin just isn't true.

For digital extortion it is true, bitcoin is unique, for physical extortion it isn't. The reason being that it's very hard to send money without a trace digitally without using cryptocurrency, so bitcoin is unique here. If you run an extortion over Paypal, you're in jail by the end of the week usually. But physical extortion is possible because cash (or say jewelry) from ATMs is difficult to trace, bitcoin doesn't make this any easier. On the contrary, I'd rather steal from my ATM card than from my bitcoin wallet, as I only have $150 or so in a non-multi signature wallet, but my ATM has a $1250 a day limit, because I can configure my risk profile with bitcoin myself.

More likely, they will take your $500, drive you around in their trunk for a few days while extracting another $1500, then let you go under the promise to keep paying $100 per week until your original balance runs out and never talk to the police, or else they'll come back to kill you and your loved ones.

You may keep paying afterwards... or you may not. But even if they do not follow on their threats, $1K each for a weekend of "light work" is still pretty good money.

This is pretty similar to kidnapping someone and using their ATM every day at midnight with a hoodie on, and when you're done, you let him go and THEN he'll block his card.

And interestingly this virtually never happens that I know of outside of some countries in South America (where there's actually a term for it, express kidnapping)

In any case, it's no different to someone being abducted for his ATM card, it applies exactly the same.

We can have a broader discussion about physical security, I'm not saying we're all perfectly secure, but acting like it's a unique problem to bitcoin money is disingenuous.