Volatility has been decreasing over the last 6 months.


http://bitcoincharts.com/charts/mtgoxUSD#rg180zvzlztgSzm1g10zm2g25zxzi1gCVolatility

This indicator is normalized, so it does not depend on the usd/btc price, but only reflects variations.
(the indicator is dependent on the time scale, do not compare results obtained on daily charts with hourly charts)

My interpretation is that the supply of bitcoins is now distributed among much more people than a
few months ago. We saw a lot of massive sales, where a single trader used to sell 10k or 20k bitcoins
at once. When this happened, the coins that were sold were distributed among many buyers; the result
is that the number of people holding bitcoins is now much higher. Of course there were a few massive
buys too, but much less; buyers typically bought smaller amounts, especially during the downward trend.

This distribution of bitcoins among traders is only one factor explaining volatility.
There are other factors, such as media attention and adoption, that are not predictable.
However, the observed decrease of volatility should be linked to the redistribution of bitcoins among traders.

Of course bitcoin is still very volatile, compared to other currencies or precious metals.
However, the decrease of volatility should facilitate trade.