Is Bitcoin less anonymous than we think?

I guess that question is more of a individual question that each of us must answer, however, in general terms the overall answer is probably "yes"!

One of the major benefits of using Bitcoin is because it is anonymous, or at least mostly anonymous, right?

We can move money around all over the world if we want to without revealing explicitly who we are.

That was the dream at least.

However, it looks like those days might be numbered.
The truth is that Bitcoin is less anonymous than people think.

According to a report out recently, the IRS is currently using special software to reveal Bitcoin users identities in order to find out who is failing to pay their taxes (among other reasons probably).

A contract was discovered between the IRS and Chainalysis where it was revealed that the IRS is paying them to help identify the owners of digital wallets.
Not that surprising, but how much do they really know?

That is where it gets a little scary...

A letter from the co-founder of Chainalysis to the IRS reveals that the company has information on over 25% of all Bitcoin addresses.

A screenshot of the letter can be seen here:

Not to mention they have tags on other accounts which may be used to find the identities of those accounts at some point.

Chainalysis is based in Switzerland (ironically?) and has an office in New York.
The IRS is out for blood.

The hiring of Chainalysis goes right along with the earlier crackdown on Coinbase by the IRS. Where they tried to get information from Coinbase on all their accounts in order to catch tax evaders.

Luckily Coinbase wouldn't play ball, so now the IRS is requesting information only on suspected tax evaders.

The IRS claimed that only 802 people declared a capital gain or loss on Bitcoin in 2015, which is a shockingly small number considering millions of transactions took place during that year (including hundreds of thousands by Americans) and the coin went from roughly $12 to $1200 over a couple year stretch.

There is a very high likelihood that many people made a lot of money during that time but decided they didn't have to report that income.

The IRS wants a piece of the action.