With the price going down. People had rules set to sell their bitcoins if it got to 30, 20, 10 etc. What ever they personally set. If someone can initiate a market downturn they can essentially force others to sell their bitcoins as those auto sell/limit order rules are hit (if those people have the options set.) Once that's done, There's a flood of bitcoins up for sale in the market and you can buy them on the cheap.
Maybe FreeLancer can elaborate on his "orders" he mentioned he had set.
Yes, I guess the technical term for the preset orders I've mentioned is a limit order, which merely means that you designate a price in advance that you wish to either buy or sell at, and how many shares (or bitcoin, in this case) you want to transact. I have never actively traded anything else before, so it's all new territory for me, too. I participate in the stock market through (mostly index) mutual funds, I don't actively trade individual stocks, because the data shows that even the experts have a hard time beating the averages, so I'm sure not going to try.
With BTC, my goal isn't to make money in the short-term by trying to time the ups and downs, but rather the accumulation of wealth, betting on the likelihood of the scheme's long-term success as a unique store of value. Therefore, my limit orders are all set to buy a few more coins as the price falls during these flash-crash scenarios, not sell in a panic due to fear. I'm comfortable with this strategy because I only use dollars I can afford to lose. I got in when the value was in the single digits, I've already recouped my initial investment and put those dollars back into my traditional accounts, and anything from here is gravy, which helps to lessen the chance that fear and greed will cloud my judgement.
There is (probably) nothing wrong with the nuts and bolts of how bitcoin works, but there is weakness regarding how it's integrated into the existing economy. The exchanges are a huge vulnerability, and Mt. Gox is a target due to being the biggest game in town. I believe Mt. Gox to be trustworthy, based on my experience, and I think they are doing the best they can to adapt as this economy wildly expands, but there will be exploits by the hacker crowd to manipulate the price to their advantage. That's part of being on the bleeding edge of a crypto/anarchist currency, there are no referees or do-overs. It's the wild, wild west, so you've got to be aware of the risks.
