It's very similar to any market, prices are derived through simple supply and demand. The supply side is straightforward, the demand side however is highly susceptible to all sorts of human traits.

Some people are pumping and dumping tokens to make short term gain, they do this by putting out word that something is about to rise (something they already own) and when others rush in to buy they sell off for a profit. Soon people realise there is nothing to that token and start to sell too to avoid loss.

Another reason for volatility is speculation. Not unlike the above reason, people are buying some tokens simply for short term gains, people are looking for the smallest bits of news that signal and drop in prices and rush to sell before they make a loss.

Price rises on the other hand are spurred on by (as mentioned above) news and rumours that say something will rise, so people buy quickly to try and get in early - this pushes the price up.

There is also a certain amount of FOMO going on with people throwing money in without any due diligence.

All in all, these examples lead me to my main point, the prices and therefore volatility are based significantly on human emotion and nature... and how stable are we?