In my opinion, the price is pretty unstable mostly because there's much more traffic in speculation than in normal commerce. When the market is dominated by speculators hoping to make some money by buying and selling at the right time, then it'll tend to vary widely for any reason at all. Hopefully, the number of merchants accepting bitcoin will grow and the commercial traffic will grow with it, and that will tend to stabilize the price.

As for whether to hold or sell now, that's your call man. By asking the question, you are essentially speculating yourself, and whether you make or lose money depends on how your guesses line up with the guesses of all of the other speculators out there. This is essentially more of a financial market discussion than a bitcoin discussion.

If you want to help the situation, work to increase bitcoin commerce. Buy something you need with bitcoins, ask a merchant to support it, accept bitcoins yourself if you have any kind of store, whatever is practical for you.