Awesome post. Well written :)
I didn't see this flash crash but I do remember it happened to Bitcoin a good year or so ago when it was around $300 and it crashed down to almost nothing.
Its somthing to be aware of if trading these coins, making sure right stop losses are in place to overcome this occurrence.
Have a wonderful day. :)
Sometimes stop losses are the issue. Without the right mechanisms in place on the Exchange, the stop loss you thought would protect you, screws you. See my previous comment in response to full-measure.
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Stop-loss orders without a limit price are seen by many as very dangerous (more like a loss order ;) ). If the stop loss feature doesnt allow you to set a limit price, don't use it, it will do more harm than good.
Margin trading is a whole another beast. Pretty much guaranteed your position will be forcefully sold for practically nothing if a flash crash happens. Worse, if you are in multiple margin positions then your other positions may also be sold to make up for losses from the first position, effectively emptying your whole account.
This is exactly why there are so many disclaimers and terms you have to accept before margin trading. Just don't do it.
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