More people does not mean more volatility. It's exactly the opposite. More people mean better distribution and this counteracts volatility.
If you have 100 units of something and 20 belongs to 1 person, 30 to another person and the rest is distributed among 5 other people. If each of these smaller holders sells the price will already move by a lot (10%) and if one of the big holders sell you could have a 30% swing. But what if each person got 1. 1 person selling would only mean a 1% move.
but the problem with bitcoin and altcoins is that there are many people who buy many coins and there are many people who buy few coins each person and this makes a small group own more than 80% of the existing coins. When such institutional investors enter the cryptos market, they will own enormous amounts of coins, they and a very small group that bought many coins to years ago will be the kings
The way distribution works is that in time some of those big holders will spend their coins. There's no use in holding coins forever. When you spend to buy a house or whatever it is that you need the coins will slowly become spread between many other people. It's a long process but it is a sure and steady one.
You're saying that many people buy few coins. It's true, but with the growth of value 1 coin will become divided between more and more people. There will always be whales but it's better to have that 50% not owned by whales distributed among 10 million people than 1 million.