Fungibility essentially means a payment unit of account is interchangeable. You give me $1 and I give you 4 quarters as change, and no one feels short changed.
Fungibility is one of the seven characteristics of money. Currency is technically not money because it does not serve as a true store of value, but meets the other two functions of money (i.e., medium of exchange, and a unit of account). However, for something to become a true currency to be used for everyday payment purposes, it needs to be fungible.
Any ability for tainting a currency causes tainted funds to loose their value, and loose its fungibility. Hence, tainting can be viewed as being a form of censorship directed inflation by an authority. How long do you think an empowered authority to taint electronic money can be trusted? This is the flip-side to "drug money"... used by authorities to provide a disingenuous long-term narrative to ultimately rob citizens, absolute power absolutely corrupts.
If payments remain private, those funds remain fungible. After fungibility barriers are 1st broken by Monero, the question is will some cryptocurrencies be perceived as almost being money? The first step of getting there is to achieve full currency status, and subsequently have very deep pools of free-market-driven liquidity established.
Long term savers/HODLers provides price stability to cryptocurrencies that eventually is perceived as being a store of value. "People bet on beliefs and invest values." Today's speculations can become the values/money of tomorrow.