That's why average people associate Bitcoin with illegal stuff or criminals. But in reality, I don't think that all of it are serious crimes, illegal activities can be smaller offences; money laundering or simillar. Either way, it's irrelevant, who knows how much fiat is used for illegal activities, and Bitcoin should be treated differently because of this.
One day, all these bitcoins will somehow hit the market.

They probably already did, but we shouldn't really care. A big percentage of cash that could be found anywhere in circulation was used for illegal activities, but why would you care, it's just paper, you'll spend it.