People are selling in panic because they are not prepared for this if they are new and often they spending money they can't afford to lose. They think about profit and don't considering the fact that price can go down.
I think people sell in panic when they used borrowed money to trade in crypto or they are new in this market and have not witnessed Market volatility. Sometimes people use high leverage in future trading up to 100X and in case market goes against their trade, they find no other option to close their trade to avoid total loss of their capital. Such type of high risks trades should never be taken in first place and if taken, stop loss must have been used.
Well, it's true that this is one of the things that makes a trader panic and even make him a mental disorder because of the wrong thing. They invest in the wrong way, by making loans. So when the price is beyond their prediction, they are very panicked. Instead of wanting to get profits and profits, they even get losses because they are not prepared materially.