No court would agree that bitcoin is not an asset. The currency part is debatable, but doesn't really affect the tax situation. All currencies are assets, not all assets are currencies. Absolutely you should to report any income made in the trading of bitcoins to USDs and pay capital gains taxes on them. If you buy ANYTHING whether it's gold or a Euro or a brick or a chicken and sell it later at a profit, you technically owe taxes on that profit. If you haven't realized a profit in bitcoins yet (you're just holding them) then you probably don't need to report them.

Bitcoins and bitcoin profits are a lot EASIER to hide and not pay taxes on than most other assets. Sure there's the blockchain BS, but the resources required to definitively identify your wallet and link you to it would be enormous, require a court battle and not a priority for the IRS, which tries to maximize revenue recovered compared to auditing costs. Also the IRS doesn't even KNOW Bitcoins exist, so even searching the blockchain is a totally foreign concept for any auditor. It's very routine for the IRS to subpoena account records from major financial institutions when pursuing tax evaders, and since your name and signature is on the account it's very easy to prove it's yours. Just because you CAN evade taxes with bitcoins and probably get away with it doesn't mean you should.