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If anybody wants to know just how bad the crash was, Atari buried about 700,000 game cartridges and consoles in a landfill in New Mexico after the release of the infamously bad ET game for the Atari. A game that supposedly had more cartridges manufactured than there were existing consoles for them to be played on at the time.
It was so bad that the home console effectively disappeared from the US market as investors and customers believed that the fad had run its course and companies went back to focusing exclusively on arcade cabinets until Nintendo came in about 3 years later and proved that there was still a market for home consoles. It was so bad that Nintendo changed the name of the NES for the Japanese market to the Famicom - advertising it as a "family computer" system, not a game console.