Bitcoin's only intrinsic value is confidence. So "weak hands" will mean strong hands, and vice versa at some point in the future if I am correct.
Flash crashes (and note this recent one was planned along with a DNS DoS against this forum) could serve two purposes at least if I am correct about who created Bitcoin and their ultimate objective:
1. Condition Bitcoiners to try to speculatively time a trade because they don't have more cash flow to buy more with on next flash crash then their BTC holdings decline as they sell lower than they rebuy.
2. Induce those with cash flow to become more fully invested in the ponzi bubble, i.e. less diversified. Log scale is not so meaningful because the cash flow is not increasing exponentially.
You forgot 3. Condition bitcoiners to ignore such flashcrashes, and just not trade on them.
Note that currencies move on the Forex all the time, too, but most currency users don't give a crap, and such movements (and in the future, bitcoin's flash-crashes) will only be something the active trader minority cares about.