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What Is the Concept of ‘Liquidity Vacuum’ during a Flash Crash?

A sudden and massive withdrawal of buy-side orders by market makers during a crash, causing the price to fall rapidly with no resistance.
Greeks.Live30.10.25

What Is the Concept of ‘Liquidity Vacuum’ during a Flash Crash?

A liquidity vacuum occurs when market makers and large institutional traders rapidly pull their bid orders from the order book during a sudden, sharp price drop (flash crash). This removal of buy-side liquidity creates a void, meaning there are virtually no buyers left to absorb selling pressure.

Consequently, the price plummets further with very little volume, exacerbating the crash and increasing slippage for market orders.

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