I don't think that cryptocurrencies will replace fiat currencies outright for a very long time and as you posted above its due to volatility. At the moment, cryptocurrencies behave less like a currency and more like an equity in that it holds a value that changes from day to day based on trading. This makes it a difficult decision to actually spend bitcoin for example to make a purchase. Until the volatility drops to more manageable levels, it won't be a currency.
But will it replace banks? This is a difficult question to answer as banks do more than just hold onto your money. They offer more services that aren't currently being offered by cryptocurrencies, such as debt financing. The day you can get a mortgage backed by a cryptocurrency such as bitcoin will be the day that banks will become obsolete for the average person.
Banks are however fighting back to ensure they retain some control by adding in blockchain technologies into their infrastructure. But this is more an effort to lower costs as opposed to replacing traditional fiat currencies. Its still a bit early to see how things will progress. I am still optimistic about crytocurrencies despite this.