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?
It all depends on what you mean by trading being easier. Can we say that trading is easier when we are able to enter the market and exit successfully. Or will the definition of easy in your context be making profit. If the former is the case, we can say that trading was easier in the past but if the later becomes the case we can say that it wasn't easy in the past. A day trader cannot make profit if the coins do not move in relative positions. The more volatile the market the more profitable it will be. So an almost stagnant market will make no profit. This is the reason I should conclude that traders are making more profits now that the volatility is high than before. Remember, I am not using bitcoin as a reference, rather I am referring to the general cryptocurrency market.