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I don't know though, I mean as average investor, the money that I invested could be my emergency fund as well.
It is a bad practice to keep something as volatile as bitcoin as your emergency fund or even part of your emergency fund, unless you have already reached overaccumulation status.
Volatility means that you could end up cashing out of bitcoin at a time that is not 100% of your own choosing, and if you have no other options, because you already exhausted any of your back up funds including your reserve funds and/or your emergency funds, then at that point you sell some or all of your bitcoin that is at a time that is not your own choosing. Does not seem like a good way of managing your cashflows and back up funds, to me.
You are right, someone keeping Bitcoin as an emergency funds is making a very big mistake and not just emergency funds even reserve and float funds because just like you said Bitcoin is very volatile in nature.
If maybe you have $5k as your emergency funds and is kept in Bitcoin and you also have $2k each for your reserve and float funds and they are all keep in Bitcoin and Bitcoin being volatile in nature a dip happens where your $5k emergency funds is now reduced to $4k and your $2k each for reserve and float funds is now reduced to $1k and at this period you now have an emergency that requires $8k in other to sort it out and if not for the dip that happened your emergency reserve and float funds put together amounted to $9k which could have been used to settle the emergency and you will still be lift with $1k but because of Bitcoin volatility you are now lift with $6k from your emergency, reserve and float funds which is not up to the $8k required to sort out your emergency meaning you still need extra $2k to complete it and you may have no other option but to dip hands into your Bitcoin investment so in other to avoid this keep your emergency, reserve and float funds in bank as currency.