user492: Any idea why bitcoin prices have fallen so in September and October of 2011?  It seems like back in August, one bitcoin cost about US$17, whereas in late October, it's just somewhat over US$2.

user491: Speculative Bubble.
Simple like this:  
I watch a lot of markets charts for years and the Bitcoin chart looks pretty normal to me. Oh, and the trend is continue going down right now.
And this blog have Bitcoin chart analysis that confirm what I am saying, just to give a second opinion. (I found this right now)

user516: The answer to this other question summarises the factors that affect the price of bitcoins in a general sense. However, your question covers a specific period. According to Bitcoin Charts the price peaked at around US$30 around Jun 8th 2011, and was around the $17 mark in mid-July. It's certainly a substantial drop to now (Oct 20th) be under the $2.50 mark.
Speculators appear to be the primary driver for the peak at US$30. The purposes that bitcoins were created for are mainly for trade, but the growth in trade has been modest and couldn't explain the big spike in price prior to the peak. You could say that the underlying value of bitcoins as a currency (based on the number of people/retailers using it for trade) was exceeded and is resettling.
Though bitcoins are also intended to be useful as a store of value (which is why there will only ever be a limited number in circulation), most people probably don't have enough faith yet to put their life savings into Bitcoins, so I don't think that is affecting the price substantially.
The constant supply of 50 bitcoins per block to miners may help explain the steady decline since the peak, as many miners probably sell off their bitcoins regularly to pay for the investment in hardware. There have also been a couple of very large sell-offs of bitcoins on MtGox (9th Sep, 17th Oct in particular) which could potentially have been holdings of early adopters, or speculators that chose to reduce their investment.
As the price drops different factors come into play - less efficient mining hardware gets switched off, and perhaps increases the proportion of active miners who have faith in the future of bitcoins (and will hold on to them). If the price starts to trend upwards again, you might see speculation driving another high peak - this is normal for speculative markets and is likely to keep happening.
This question has some great comments on speculation.

user405: People are not holding their bitcoins as long.
I've speculated elsewhere that this might have something to do with the hedging mechanism implemented by Silk Road.
We all want people to use bitcoins for transactions; unfortunately they only have value in proportion to the length of time for which people hold them.  If everybody bought bitcoins (using fiat) the instant before they needed to use them to buy something with BTC and sold bitcoins (for fiat) the instant after they had sold something via BTC the demand for BTC at any given instant in time would be both (a) incredibly small and (b) very unstable, causing the price to crash and then fluctuate wildly (in percentage terms).
In one explanation, money has three roles: (1) store of value, (2) unit of account, and (3) mechanism for transmitting value.  People talk a lot about promoting the "bitcoin economy" (#3) but unfortunately without enough people using it as a store of value (#1) the price will crash and then fluctuate wildly, causing it to no longer be viable as a mechanism for transmitting value (#3).

user5: One thing a lot of people fail to notice is the decreasing volume at the exchanges. If we look at the USD volume - and not at the bitcoin volume, which is misleading because bitcoins are now worth much less - we can see a spike in June and a decrease afterwards:

The news reports in June attracted lots of people who were curious about bitcoin. A part of these people left and the market size is now coming back to April/May levels. As a consequence, there is much less money being traded. However, we still have 5 new coins being produced every minute and lots of miners who want their invested money back.
The current price is a natural consequence of high supply and low demand.

492: <p>Any idea why bitcoin prices have fallen so in September and October of 2011?  It seems like back in August, one bitcoin cost about US$17, whereas in late October, it's just somewhat over US$2.</p>
 491: <p><strong>Speculative Bubble</strong>.</p>

<p>Simple like this: <img src="https://i.stack.imgur.com/8jllR.jpg" alt="this"> </p>

<p>I watch a lot of markets charts for years and the <strong>Bitcoin chart</strong> looks pretty <strong>normal</strong> to me. Oh, and the <strong>trend</strong> is continue going down right now.</p>

<p>And <a href="http://blog.bitcoinwatch.com/" rel="nofollow noreferrer">this blog</a> have Bitcoin chart analysis that confirm what I am saying, just to give a second opinion. (I found this right now)</p>
 516: <p>The answer to <a href="https://bitcoin.stackexchange.com/questions/224/what-factors-affect-the-value-of-a-bitcoin">this other question</a> summarises the factors that affect the price of bitcoins in a general sense. However, your question covers a specific period. According to <a href="http://bitcoincharts.com/charts/mtgoxUSD#rg180zvztgSzm1g10zm2g25" rel="nofollow noreferrer">Bitcoin Charts</a> the price peaked at around US$30 around Jun 8th 2011, and was around the $17 mark in mid-July. It's certainly a substantial drop to now (Oct 20th) be under the $2.50 mark.</p>

<p><strong>Speculators appear to be the primary driver for the peak at US$30.</strong> The purposes that bitcoins were created for are mainly for trade, but the growth in trade has been modest and couldn't explain the big spike in price prior to the peak. <strong>You could say that the underlying value of bitcoins as a currency (based on the number of people/retailers using it for trade) was exceeded and is resettling.</strong></p>

<p>Though bitcoins are also intended to be useful as a store of value (which is why there will only ever be a limited number in circulation), most people probably don't have enough faith yet to <a href="http://falkvinge.net/2011/05/29/why-im-putting-all-my-savings-into-bitcoin/" rel="nofollow noreferrer">put their life savings into Bitcoins</a>, so I don't think that is affecting the price substantially.</p>

<p>The constant supply of 50 bitcoins per block to miners may help explain the steady decline since the peak, as many miners probably sell off their bitcoins regularly to pay for the investment in hardware. <strong>There have also been a couple of very large sell-offs of bitcoins on MtGox (<a href="http://bitcoincharts.com/charts/mtgoxUSD#rg60zvztgSzm1g10zm2g25" rel="nofollow noreferrer">9th Sep, 17th Oct in particular</a>) which could potentially have been holdings of early adopters, or speculators that chose to reduce their investment.</strong></p>

<p>As the price drops different factors come into play - less efficient mining hardware gets switched off, and perhaps increases the proportion of active miners who have faith in the future of bitcoins (and will hold on to them). <strong>If the price starts to trend upwards again, you might see speculation driving another high peak - this is normal for speculative markets and is likely to keep happening.</strong></p>

<p><a href="https://bitcoin.stackexchange.com/questions/1265/does-speculation-hurt-bitcoin">This question</a> has some great comments on speculation.</p>
 405: <p><strong>People are not holding their bitcoins as long.</strong></p>

<p>I've speculated <a href="https://bitcointalk.org/index.php?topic=48930.0" rel="nofollow">elsewhere</a> that this might have something to do with the hedging mechanism implemented by <a href="http://en.wikipedia.org/wiki/Silk_Road_%28marketplace%29" rel="nofollow">Silk Road</a>.</p>

<p>We all want people to use bitcoins for transactions; unfortunately they only have value in proportion to the <em>length of time</em> for which people hold them.  If everybody bought bitcoins (using fiat) the instant before they needed to use them to buy something with BTC and sold bitcoins (for fiat) the instant after they had sold something via BTC the demand for BTC at any given instant in time would be both (a) incredibly small and (b) very unstable, causing the price to crash and then fluctuate wildly (in percentage terms).</p>

<p>In one explanation, money has three roles: (1) store of value, (2) unit of account, and (3) mechanism for transmitting value.  <strong>People talk a lot about promoting the "bitcoin economy" (#3) but unfortunately without enough people using it as a store of value (#1) the price will crash and then fluctuate wildly, causing it to no longer be viable as a mechanism for transmitting value (#3).</strong></p>
 5: <p>One thing a lot of people fail to notice is the decreasing volume at the exchanges. If we look at the USD volume - and not at the bitcoin volume, which is misleading because bitcoins are now worth much less - we can see a spike in June and a decrease afterwards:</p>

<p><img src="https://i.stack.imgur.com/m22sN.png" alt="Price Chart"></p>

<p>The news reports in June attracted lots of people who were curious about bitcoin. A part of these people left and the market size is now coming back to April/May levels. As a consequence, there is much less money being traded. However, we still have 5 new coins being produced every minute and lots of miners who want their invested money back.<br>
The current price is a natural consequence of high supply and low demand.</p>
