Why did this happen? The BitCoin is unstable because it is still "high risk" right now. The BitCoin is very similar to high risk stocks in the stock market. If it all works out the ones that invest could get a lot of money in the end. If not, well, they could lose their investment money.
Will this happen again? It is possible. The huge increase in price that happened earlier basically came from more awareness of the currency because of it being all over the news. Investors grabbed on and started on the roller coaster of that risky investment. The drop came from a scare that, if the Chinese government banned the use of it in their country, it is possible that it could happen else where.
It is normal that a high risk stock rises and drops suddenly. That is why investors like it so much. You buy at the low price and sell when it is high. You should be seeing the price of the BitCoin slowly rise again. It may not jump back to where it was last week but it is expected to rise.
The main reason people use the BitCoin is basically in replacement of cash. Cash can easily be untraceable as you can get cash and spend cash without anyone knowing about it. That is where the attraction lies.
We will keep on eye on it and let you know how things go. :)