Almost every article published to date that covers the topic of bitcoin as an investment takes it as a given that bitcoin is a risky investment. "Only invest what you can afford to lose" is a common sentiment even on the bitcoin forum.
Although I agree that bitcoin should/can be considered a risky investment depending on the context, I submit that a small bitcoin investment is actually a conservative/risk lowering investment for most US investors. This conclusion is reached when you consider the full context and diversification of the average investment portfolio in the US. It looks a little something like this: stocks, bonds, real estate, cash and cash equivalents, and precious metals, typically in that order based on the relative weight of the investment. Note that all of these assets are directly linked to US dollars other than precious metals and real estate. If we make the assumption that diversification lowers risk, it also makes sense that the average US investment portfolio should not be overly weighted towards US dollar denominated assets. Sure the US dollar is the world's reserve currency and therefore has a "low-risk" tag currently associated with it, but that doesn't mean it makes sense to have almost all investment assets directly tied to the US dollar. Proper diversification includes diversificatoin into other asset classes, including non-flationary currencies such as bitcoin. Considering the potential that non-government backed crypto-currencies have to disrupt the monetary system, even if one believes that the probability is small of a wide scale disruption, it still makes sense to have some assets (i.e. bitcoin) that would benefit from such a disruption.
I'll admit that bitcoin fits the classic definition of a riskly investment. However, I would argue that for an investor that currently has a high allocation of stocks and bonds, an investment in bitcoin would actually lower risk for the complete portfolio rather than raise it as it is commonly assumed.
Therefore, I no longer think it is appropriate to broadly classify bitcoin as a "risky investment" to US investors. It is certainly not a non-risky investment, but all such labels should be taken in the context of a given investors full investment portfolio.
I think what you have to identify here is what you mention towards the end of your post. 'Risk appetite' is a metric that every investor should be comfortable with measuring. This is subjective to each individual so debating on how 'risky' they deem bitcoin to be as an investment is generally a moot point.
When advising others, I also tell them "Only invest what you can afford to lose". I am heavily invested in bitcoin. Why? Because I know that my risk appetite is massive.
Yes, its ok to know that bitcoin is risky, and to invest heavily as long as you know the risks.