ETFs destroy pseudo anonymity, because it is highly regulated with strict KYC requirements implemented to identify every trader on their platform.
ETFs, like stocks, follow strict rules. They need personal details (KYC) from everyone, so using them removes the privacy that comes with cryptocurrencies.
Most investors don't hold their own keys anyhow, so this won't make a difference for most people.
It's no different than using Coinbase or Binance or some other wallet app.
And a public ledger is not very... private. My GMail account is more private than Bitcoin because at least there would need to be a valid court order to breach my private email messages. Bitcoin transactions can be triangulated by anybody on the Internet.