This is called a liquidity trap and it's well-studied in finance circles. Basically, in order to have a well-functioning market, you need a roughly balanced number of sellers and buyers at any point.<p>If an external event triggers enough parties' simultaneous need to sell, it can suck all the buy orders out of the market, causing the price to fall lower and lower as the sellers have to submit ever-lower prices to find willing buyers. The event creates a positive feedback loop as sellers go lower and lower to find buyers, leading to sharp, discontinuous movements in price.<p>The ultimate answer to this is tons of market depth/liquidity, but absent that, exchanges have "circuit-breaker" policies in place that cause trading to halt if prices move too much, too quickly.<p>Ultimately, ensuring an orderly market is a massive challenge that shouldn't be taken lightly.<p>EDIT: Child is correct, I think liquidity traps are from macro, but same idea - not enough buyers, too many sellers.