b. price went -25% down, we sell.
reasons
we need the money now
we are fearing it will crash more (fear, market sentiment)
we doubt our initial decision to buy (judgement by single point of time)
we see others leaving the investment (fear, mass psychology, group)
we see other investment that are not -25% (fear)
Using "hot money" to invest is absolutely not justified. This applies to any type of investment, not just the crypto market. This can also affect the psychology of traders in making decisions and more lead to wrong decisions, especially when they are pressed by needs when the market situation is not supportive.