What causes something like this “flash crash” and how does one average it out in a deployed system?

My question is regarding these flash crashes, I assume someone sold a ton and it got evened out? How much would someone even have to dump to cause a dip like that.

That said, how does this fk up the algorithms that companies have, do they treat it as an outlier? I guess this is purely from postmortem data analysis it’s fair to ignore it but when this happens live, what’s the course of action what would you or your algorithm do when suddenly there’s a crash, and your position is young so you’re instantly in red. How often does this happen, and what’s the best course of action?