With the right mindset, to hold against sharp drops in price will not be a problem because the confidence will be there that Bitcoin will always recover.
I agree with everything that you said in your post except the last line (above), and it is problematic to believe that the bitcoin price will "always recover," even if we know historically the BTC price has trended up, and there is no real evidence that the UP trend in bitcoin is going to stop, but it is still not guaranteed to go up. so it is inaccurate to use the term "always" whether you are merely thinking it in your mind or believing that it is actually going to happen that way and that is the reason why you might end up overly leveraging into bitcoin because you wrongly have those beliefs about bitcoin being "guaranteed" to go up..
You are right, there is no guarantees even in life. I just used that for emphasis but it turned out to be wrong. You will agree with me that investing in Bitcoin requires some form of trust and confidence that it will be worth the funds injected into it even if this is a passive income. Anything contrary to having faith in Bitcoin might lead to panic and sometimes giving in to fear from those spreading fud. However, that does not mean we should not exercise caution while investing. Having gone back to read my post, it is obvious I expressed my confidence in Bitcoin beyond the limit and that is not correct.
I'm a dutiful follower of the DCA method, observing all that it stated and applying some finetuning like setting aside emergency funds so that I will not give in to the urge to sell when I shouldn't. Therefore, my confidence in Bitcoin is still within my limits as I have not taken actions that shows otherwise.