Does the number of traders directly affect the volatility of the market? If it does, can we assume that trading was easier before with less traders (less volatility) than now when there are more traders, and the market more volatile?
People trade bitcoin than shit coins but why bitcoin is less volatile than shit coins? More people trade gold but gold is less volatile than bitcoin? More traders does not mean but the marketcap is what that is very important. The lower the marketcap of a coin, the higher the volatility. Not about the higher the number of traders.
Your analysis is very self explanatory, it's not really the number of traders that drives volatility in the market, but the market cap of a coin, meaning that if it's high the chances of volatility becomes low, and if the market cap of a coin is low, it's chances of volatility will be higher, so the volatility and market cap of a coin works in opposition. Although I still think that the influx of more crypto traders will have some effects on price volatility, as they increase the market will become more volatile, but it's not to undermine the fact that is earlier mentioned about marketcap being the main driver.