If you are using "crowd", then it's more common to use "mingle". I was surprised, however, to find very few examples for either one in COCA*: "merge with the crowd" only had one example. "Mingle with the crowd" only had eight examples. I don't trust Google searches very much, but "mingle with the crowd" is far more popular there.
Although "mingle" is more common with reference to people, if I wanted to say that the person had disappeared in the crowd, I would choose "merge."
We say that people minglewith or in a crowd, meaning that they are mixed in with the crowd. It also has the particular meaning in a party setting of going about and chatting with different people instead of hanging around the same people (or the same wall or table) all night. Even with all this mingling, the person remains separate, an individual component of the larger crowd, part of it but still distinguishable within it.
On the other hand, if the person has become lost in or has disappeared into the crowd, merge seems more appropriate. It implies that the person is, metaphorically speaking, no longer a separate individual but has merged into an amorphous whole. We also use the phrase "blend in with [the crowd]" to mean the same thing.
I can't think of a single word for this phenomenon, but "blend in with the crowd" and "got lost in the crowd" are very common expressions.
Oops. I forgot that Kane wanted to say that the person "has become lost in the crowd". I agree with Edgy, then. "Blend in" or "got lost in the crowd" are much better.
Sorry, Kane. I was so focused on "merge" and "mingle" that I forgot what you were trying to say. I don't think "merge" or "mingle" do a good job at expressing being lost. You should use one of Edgy's suggestions.