What happened during the flash crash is that someone woke up thousands of ether and executed a multi-million market order to sell. A market order is an order that must be executed at the current price of the market, this means that a big market order to sell will essentially eat up all the buy orders until it’s filled.
This ate up the buy orders from 350$ to $220. Pretty nuts but the story doesn’t end here. When some people buy a security they like to protect their downside by putting in a stop order. A stop order is an order to sell if the asset hits a certain price. For example, if i buy at 300, i put in a stop order at 260 and say hey, if it hits 260, try to sell everything. These stop orders executed market orders and made people sell their ether at really low prices. I saw an order of 3000 Ether get executed at a price of 15cents. $400 gets turned into 10 million in a few seconds. A lot of people lost money because they ended up selling their assets at crazy prices and the value ended up going straight back up to over $300.