Like many things Bismarck said, this particular quip was quite witty but also one that loses something without the full context. According to the first volume of Otto Pflanze's three-volume biography of Bismarck, the quote originated in a May 1868 North German Confederation Reichstag debate over wine tariffs. This Reichstag was not a unified German governmental body but rather a more complex entity with a strong regional component. The largely Catholic southern German states formed a sort of oppositional bloc to Bismarck and Prussia, especially since the former states had largely had to join the Confederation by virtue of Prussia's victory in the Austro-Prussian War. In this particular debate, there was a concern raised by the Hessian delegation that tariffs over wine would harm relations with France, to which the Swabian deputy added:
Somewhere on a mountain hangs an avalanche, the least disturbance can plunge into the chasm.
Bismarck then responded with the "An appeal to fear" riposte. What he was after in this Reichstag session was two interrelated things. One, he was laying out to all the deputies that the Prussian-led Confederation did not fear the Second Empire of Napoleon III. This was a bold statement given that the past two centuries had been characterized by French intervention in Central Europe and one of the major facets of European history was that the French could intervene within the German states with impunity. The other thing Bismarck was doing in this speech was claiming the mantle of German nationalism for Prussia. He was painting the southern German faction as less-German and more prone to fear-mongering than facing the hard realities of German unification. Bismarck's contention that "true" Germans do not listen to threats tars the southern German faction as somewhat less than German.
Isolated form its context, Bismarck's quote appears to be nationalist bluster, but it was part of his own skillful tactical maneuvering against his political opponents where rhetoric was another weapon in his arsenal.