Image source: Zero Hedge http://www.zerohedge.com/news/2017-06-21/ethereum-flash-crashes-after-status-ico-clogs-network
So what happened?
A big market order came in and lowered the price. Significant, but not too much.
A market order sells at the current market price. If there are not enough buyers, lower the price until you find a buyer.
For small orders, nothing interesting happens. Big orders lower the market price significantly.
Next, we had many stop loss orders:
A stop loss order sounds like a very safe thing:
If the price goes below $200, sell. What we have in mind is: sell for $199,99.
But this is not what a stop loss order is.
A stop loss order is a market order at the worst possible time: When everybody else is doing the same thing.
And so it happened, that some of these stop loss orders sold for 10 cents instead of $200.
So these are immature markets, this can not happen in mature markets!*
Nope. Happens all the time.
Look at the gold and silver futures markets at the comex.
Fonds like pension fonds want "exposure to gold and silver" for "safety".
They do this by going long gold and silver futures.
Instead of buying the real thing, they place a bet on rising future gold and silver prices.
And to make it "safe", the fonds make this bet with stop loss orders.
Remember? Stop loss orders are market orders at the worst possible time.
Now this is what happens from time to time at the Comex:
There are only a few big banks at the Comex trading gold and silver futures.
Those banks have customers: the fonds who place stop loss orders.
So the banks know where the sop loss orders of their customers are triggered.
Now from time to time this happens:
A big sell order hits the market. The fun part for the seller is that he can sell something that doesn't exist. At a huge margin.
This means it costs only a few cents to sell a dollar worth of non existing silver or gold.
"By accident" those sudden orders are big enough to trigger the stop losses of the fonds: market orders at the worst possible time.
So after the initial big market order selling at a high price, the fonds sell at a low price and the initial seller can buy back the non existing gold and silver at a much lower price.
Each time the fonds lose money. Your pension money. And the initial seller of the non existing gold and silver gets the fonds money. Your pension money.
But isn't this criminal? Yes, probably.
But somebody has to do something about it!
Nope.
See, this criminal game sets the price of silver and gold artificially low. Extremely low.
And this extremely low silver and gold prices allows the state and politicians to steal purchasing power from you by inflation.
With this stolen purchasing power they can cover up all their mistakes so you elect them again next time.
You won't notice too much, because both steal from your future.
How long will this criminal game go on?
As long as possible. The financial sector wins. Corrupt politicians win. You lose.
Until someone demands delivery of the physical silver or gold and it is not there.
This will happen some time anyways. And when (not if) it happens, you want to possess physical silver, because it is even more suppressed than gold.
I expect this to happen first with silver, because the market is much smaller.
Back to Ethereum, Bitcoin etc:
As long as there is no big futures market, this price suppressing game can't be played with crypto currencies.