Privacy and anonymity are important. Whether bitcoin will fail without them, I don't know. At some point bitcoin reaches a point where one doesn't need to be exchanged for fiat, people just exchange in bitcoin which makes anonymity even more important. But also easier since you don't need a centralized exchange.
You can still achieve privacy/anonymity on Bitcoin if you carefully follow the necessary safety precautions. Using mixers, Tor, or even changing BTC addresses for every transaction, should be able to improve your privacy at every level. I'd steer clear from centralized exchanges because they force you to provide personally-identifiable information (KYC/AML). For true anonymity, one should always use a decentralized exchange or trade Bitcoins in-person (P2P).
I wouldn't worry about governments increasing their regulatory efforts against Bitcoin as long as it remains decentralized. Just my opinion
