I think the more regulation of bitcoin becomes more restrictive, unnatural, loss of volatility could be a slower step than it is depending on what the user base expects, including price treat.
Regulation has not started yet. So you cant say that right now without proof backing your claim. If things become restricted then trading will decline. But is that what a government would usually want?
No - this is because every government wants to make money from the users who are under its control. Just like in the stock markets, the exchanges need to pay some fees to run a license, similarly there will be some sort of fees + taxation based on what you trade. This is exactly what the whole buzz about regulation will actually bring in, unlike the crazy conspiracy theories.
Maybe there will come a time when bitcoin becomes legal, people will remember about “volatility. Even if a Bitcoin ETF is accepted, the speculative nature of more may come at the expense of usage and settlement.
Stock markets are regulated, they are still volatile - how do you explain that? And since regulation has not started yet, people are only speculating every possible outcome without taking into account the feasibility of that outcome.
^ that my friends, is exactly how we humans end up creating bullshit about something that may be good for the future.