You don't pay taxes the moment it is converted, but you need to record any potential gains (or losses), so they can be included in your 1040 Schedule D for your tax year.
What really confuses me is i hear bitcoin is anonymous so if thats the case....
Anonominty is irrelevant. Cash is anonymous. Tax reporting is up to you.
My post and this post discuss the same things. To be clear, Schedule D is populated based on Schedule(s) 8949, and I don't know whether or not Schedule(s) 8949 are actually required in filing, e-filing, or audits vs other clear records to populate Schedule D. Also, bitcoin is not anonymous, it is pseudonymous. Also, as all transactions are public, so depending on how you manage your bitcoin, it is theoretically possible to learn quite a bit about many of your transactions once even one of your addresses is known.