Panic sell is not bad idea actually. The reason is if price falls down more (it will), you can buy it cheaper. Eventually you will end up with more coins.
So, selling coins at right moment and purchasing it back can be very profitable.
The reason why the price of bitcoin deflating. Because of some big players people. Like the MT GOX trustee has sold half a billion worth of bitcoin.They can easily afford to monopolize the price of bitcoin. Its their game and strategies to buy more coins in a very low price. Especially this time many coins holders panic selling thier coins no matter how low the price is. Without even think the consequences that they lost their profits. So the price market of bitcoin is very affected in a very low price. At this time it is better to hold our coins. And wait for the right time when the price of bitcoin going back to inflate the price value of bitcoin.