I don't think the price of bitcoins are going to go up after the reward changes. I would wager that they're going to remain the same or go down. Markets don't like volatility or unknowns so with all the speculation, I think it's going to have a negative effect on the exchange rate. The first thing I would figure happening is a difficulty change, as many GPU miners will shut down because of the reduced block reward vs. energy costs not being worth it.
I think you got it wrong here. Markets have no emotions.
Look at markets here experiencing high volatility:
In fact volatility has, at least for bitcoins, no effect on price in terms of long term development. Price is only the expression of future expected value. Volatility rather determents the character of the underlying security and attracts the according crowd. High volatility markets are traded by risk takers and avoided by conservative finacial actors that look for predictable price developments. If you mean by markets: market makers, than let me tell you:
They fucking love volatility! Just have a look at volatile times in contrast to stable times and the volume traded in those. More people trade in times of volatility at higher stakes.
About the price drop/rise after reward change: I think it can only positively reflect on prices as supply always goes down, while demand can be expected to go up for a long time. Maybe sudden surges will not be huge, but I expect a smaller rally for 1-2 month before and after the event, just because people think that other people think they will buy and because its such a widely known and expected event. The culminating rise in price may not be as stark, because even today traders take into account the rise in value thats expected and thus buy now to be ahead of the market, triggering a slow appreciation of price long before the supply shortage actually comes into effect.
