What is needed to stabilize the value of bitcoin(beyond a larger market)
Less speculators. It's my opinion that speculation is 99% of the current price.
I consider this to be a serious downside to BC being a deflationary currency: it encourages speculation and hoarding, which cause the price to fluctuate as speculators flip-flop between "up up up the value will be huge when BC gets adopted for everything!" overoptimism and the current "I'm losing everything but maybe I can hold on a little longer and it'll come back... maybe I'll sell a little so I can eat" foolishness. (No, you'll lose it all if you keep that up. It's frustrating watching people who've never experienced a speculative asset before.)
There really isn't a floor on the price until actual commerce takes control back from the traders, and there's no guarantee that will ever happen: while I believe there's a future for distributed e-currency, it might not the the BC. Something else could replace it.
I'm giving serious thought to how to create a currency that allows some inflation to keep the value stable. That part's easy to do through a number of mechanisms: the obvious one to me is to hand out more coins per mined block whenever the price goes too high. I have a lot of thoughts on how to do that fairly and rationally, but it really doesn't matter unless there's a way to solve the harder problem: how to inject some deflation whenever the price goes too low. You can't do the reciprocal of extra mining rewards easily. You can't just tax everyone's wallets and destroy those coins. (That would keep the price stable, but my goal is to keep a wallet's value stable.) I'm not sure there IS a way to solve that problem.
For now, I'm encouraging everyone I do business with to use BitCoins. I want a stable BitCoin, and with the current design, a real commerce base is by far the greatest source of long-term stability.