The strategy certainly works but only on quality coins and not dead or weak coins. Although I do not understand why people sell cheap and at a loss, let's just accept that fact and take advantage of discounted quality coins.
One reason, they need the money for their daily expenses. If you have extra money in your stash, you won't be selling at a very low price. You will wait for it and since you have the money for everyday living, you have the luxury of waiting until you see a good profit from your holdings. But sadly some people do not have luxury and most of the investors invest all they have so in a long run, they are forced to sell their holdings even if they are at a loss.