According to this : http://www.quora.com/Economics/Why-are-bitcoins-more-unstable-than-fiat-currencies-like-the-USD
Bitcoins are volatile in part because they have no real futures market, so people can't easily short BTC.

According to me, it's because Bitcoins have been designed to increase greatly in value over time, which encourages hoarding. I can't believe people actually think that massive sustained deflation a good thing for a currency. Nobody can put prices in or truly conduct commerce in BTC. Merchants that use BTC now don't actually use it as a currency... they conduct the transaction in BTC and then immediately exchange it for USD. They shouldn't have to do that, but they do, and they will continue to have to do that for the forseeable future.

In my opinion, there will be another cryptocurrency that is designed to be more stable over the long term than Bitcoin. A Bitcoin killer. I do not think any of the existing alternative coins fulfill this goal, but I at least hope that it will happen someday. Something that takes what Bitcoin got right, and fixes several of the things it got wrong. This currency would be designed to be very nonvolatile in value, or to perhaps deflate at a slow and predictable rate over time.