Typically, a drop in asset prices is associated with mass sell-offs. However, this is just one side of the process. An equally important factor is the lack of buyers. If there are not enough willing participants in the market to purchase the asset, its price will also decline, even if the number of sellers remains stable or moderate.
Mechanics of Pricing: Demand and Liquidity
The market price of any asset (stocks, bonds, real estate, cryptocurrencies) is formed based on the balance between supply and demand. A common misconception is that a decrease in price means active sell-offs. However, in reality, prices fall not only because someone is actively selling but also because, at a certain price level, there are simply no buyers willing to purchase in the necessary volumes.
In liquid markets (where there are many participants and a high frequency of transactions), prices decrease gradually, as there are always buyers at every level. However, in illiquid markets, prices can plummet abruptly because the lack of buy orders leads to a sharp decline in value.