Many believe that Bitcoin is completely anonymous. However, with forensic analysis, any Bitcoin address used in a transaction is very likely to be traceable. This means Bitcoin transactions are actually pseudo-anonymous.
All Bitcoin transactions and the wallet addresses involved are recorded on a public blockchain — the Bitcoin blockchain, to be specific. They are open and available to everyone to see.
However, Bitcoin wallet addresses alone don’t reveal any identifiable details. However, they do provide a foothold for further investigation. Imagine your Bitcoin address like an email address or an online alias; how hard it is to link to your actions depends largely on what you do with it and the willingness of another party to trace you.
Say you publicly share your Bitcoin wallet address. Perhaps on a forum. Even if it’s not shared with any identifiable details, you may have used the same username somewhere else. You may have shared identifiable details in another post under that username, which someone can track by looking through your posting history. You may also have used an email address to sign up to the forum, which is also public. It’s not hard to then connect the dots.
Essentially, any time you share a Bitcoin wallet address, you make it possible for someone to link you to it. If you’re buying something from a shop, the merchant is highly unlikely to bother tracing you, of course, and to do so is costly. If you’re doing something more nefarious with your Bitcoin though, the police may be more inclined to do so.
It’s also important to note that because you can see all transactions that take place over the Bitcoin network, multiple Bitcoin addresses can be grouped together. They can then be tied to the same address. Therefore, if just one of these addresses is linked to a real-world identity through one or several of the other de-anonymising methods, they all can.
SOURCE: Can a Bitcoin Address be Traced?