When panic selling hits the cryptocurrency market, liquidity typically deteriorates rapidly. Market makers may withdraw bids or widen spreads, reducing the number of willing buyers. This lack of liquidity exacerbates price declines as sell orders struggle to find counterparties, leading to deeper drops. The vicious cycle of falling prices and evaporating liquidity can amplify market volatility, with assets potentially experiencing sharp, uncontrolled declines until buying interest revives or external factors stabilize sentiment.