The price of bitcoins can rise or fall and if it keeps falling the only effect is the loss of confidence in holding bitcoins hence many traders will be forced to sell at a lower price than bought for and hence keep the price falling further.
As what you said, people would lose confidence and many would let go of their coins and sell it even though they lost more than half of the value of it. As for others who believes that the coins should have more value then it would be an opportunity for them to buy more at a cheaper price so that when the market turn around, it would be more profitable but then there is a risk that it would not go back up so theis investment would just be losing. Given the situation nowadays, I think it is just a temporary downfall because there are still many people who believes that it is more valuable.
If the bitcoin price keeps falling means people who knows well about crypto market would surely use this chance to buy more bitcoin for future. But doesn't know about crypto market get panic about the price keeps falling and ready to sell their bitcoin. But this is not good only long time holding will give more profits than short time. So just keep your bitcoin and wait for some time with patience surely yhe market will recover.
Panic selling would happen but at some point, sellers would be exhausted so the price would eventually have a support and then it would be time for the buyers to appear. Instead of just waiting for the price to go back up, I think it is a good opportunity to take advantage of the fluctuations wherein we should trade so that wherever the price would go, we can still profit from it.