The simple answer is that sellers kept taking the 'ask' prices on the exchange until the only ones left were significantly lower. See this graph of current 'market depth' (existence of bids and asks):
http://bitcoincharts.com/markets/mtgoxUSD_depth.html
In a double auction market, there are bids (offers to buy) and asks (offers to sell). The 'market price' is the last price at which a bid or an ask was taken by a market buyer. Taking a bid or ask removes that bid or ask, queueing up the next in line. In an illiquid market, there aren't many bidders and/or askers, leading to price volatility. In a liquid market (such as for US Govt bonds) there are many bidders and askers, meaning the price swings are much more likely due to a significant change in information.
Hence my contention that daily volume is the most important stat to watch on the BTC market. It's a proxy for market depth, which is a precondition for liquidity and relative price stability.
In a double auction market, there are bids (offers to buy) and asks (offers to sell). The 'market price' is the last price at which a bid or an ask was taken by a market buyer. Taking a bid or ask removes that bid or ask, queueing up the next in line. In an illiquid market, there aren't many bidders and/or askers, leading to price volatility. In a liquid market (such as for US Govt bonds) there are many bidders and askers, meaning the price swings are much more likely due to a significant change in information.
Hence my contention that daily volume is the most important stat to watch on the BTC market. It's a proxy for market depth, which is a precondition for liquidity and relative price stability.