How Does the Depth of the Order Book Influence the Impact of a Flash Crash?

Order book depth refers to the volume of buy and sell orders at various price levels. A deep order book, with large volumes of orders near the current price, acts as a buffer.

It can absorb significant selling pressure during a flash crash, limiting the price drop. A shallow order book, conversely, offers little resistance, allowing a flash crash to cause a much steeper and more dramatic price decline.