It helps price in future price shocks, and adds liquidity, which has a known dampening effect on volatility. With respect to the latter, my own personal theory

It helps price in future price shocks, and adds liquidity, which has a known dampening effect on volatility. With respect to the latter, my own personal theory for why this is is that more liquidity means more individuals actively trading the asset, and that translates to more non-correlating factors affecting the price. This makes it less likely that a shock somewhere in the economy will have a significant impact on the price. Modern economic scholarship properly offers a better explanation.