If I get cash from the ATM and then the value of the dollar goes up do I owe tax on that?

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Then why in the world do I owe taxes on Bitcoin that is now more valuable then when I bought it?

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For US tax purposes, only American currency counts as “money”. The currency of other countries – and non-state currency like Bitcoin – is considered “property”. Exchange rates between currencies change all the time. If the value of your foreign currency changes in dollar terms from when you acquire it to when you dispose of it, you will have a gain or loss that can be taxable. Generally, gain on appreciated currency is taxable at ordinary income rates – not as capital gain. Losses are frequently deductible at ordinary rates, too, which can be a boon where a foreign currency position has lost value.

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If you held that dollar in the bank and collected interest on it. The interest earned is taxable. But the IRS doesn’t make you report it unless it is over 25 dollars I believe.

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then the value of the dollar goes up

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It’s not money, unfortunately. As a libertarian, I wish it was, and I agree from a philosophical perspective. But as long as it is subject to capital gains taxes, it unfortunately is not as a factual matter.

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