What is a Bitcoin flash crash?

A Bitcoin flash crash is when the price of Bitcoin drops dramatically and then returns to its previous levels very quickly. Flash crashes are not unique to Bitcoin and can happen for other cryptocurrencies, as well as stocks.

Flash crashes can be caused by whales (large holders) selling off their positions (dumping) or can be the result of market manipulation. Once the price has fallen, buyers rush in for cheap Bitcoin, which then raises the price back to the pre-crash levels.

Price can recover very quickly, sometimes in a matter of hours, which is what gives flash crashes their name. Flash crashes lead to the liquidations of leveraged long trades, which can earn exchanges a lot of money, causing some exchanges to be accused of market manipulation due to their incentive to do so by deliberately dumping Bitcoin’s price.