That's not quite true, the underlying volatility doesn't matter as long as the position sizes (as part of a basket of currencies) are correct and the relationships between the currencies are well understood.
I dont know why you're being down voted. You can diversify into high and low risk assets. Btc is a valid but high risk asset, with a future that one could at least rationally make a case for.
You can definitely argue that people shouldn't keep all their wealth stashed as dollar bills under their mattress, and that they should diversify.
Indeed, absolutely nobody advocates doing that. Everyone says to diversify, except for goldbugs and bitcoin extremists.
The question of whether it would be a good idea diversifying in that direction is still unanswered, as there's plenty of real productive assets to invest in that contribute tangible goods and services to the world.
When people are in a frenzy bidding up the prices of things that aren't providing goods and services to anyone, then you should worry.
You do if youre a 20-something software developer who can afford to lose a couple thousand dollars and take the risk of hitting it big.
While in theory it is probable that btc growth will never be as astronomic as it has been in the past, you can't time the market, and there's no telling where the true ceiling is because this market is so inneficient.
Aside: the inneficiency I think comes from ignorance and manipulation of btc, not a flaw in btc itself.
For hedging against fiat currencies, short-term price fluctuations are irrelevant. Long-term price trend is what matters, and Bitcoin gained 4×/7×/18×/32× over the last 6/12/24/48 months, far beating the inflation of all world's fiat currencies. Also note that volatility is quickly decreasing: https://twitter.com/lsukernik/status/864920873718951937
