No, I think that it can't. It could be used along with traditional money but it can't entirely replace it. Unfortunately bitcoin has to many issues, weeknesses and characteristics that don't allow it to be fully used and implemented in traditional financial system. Volatility is just one of them.
Exactly bitcoin can never replaced conventional money. Why? because as of now government still didn't accept it as a money. Bitcoin is still a big illusion for them and they considered it as just a virtual currency. Bitcoin has so many issue just like what youve said unlike the conventional money.