This has been happened before and this is a huge chance for someone who hasn't been getting any bitcoins yet at affordable price because after this event, there will be no more chance like this and it will be too late to buy bitcoins for a lower price.
Of course, we have been through this and those who are panicking right now probably can't afford to lose their capital and others are easily pulling out their investment because of the bad scenarios in the crypto market nowadays.
Anyway, this storm will pass and we will soon see some greenery in the crypto market price along with the recovery price of bitcoins because others will also start to accumulate high amount of bitcoins again.
The situation before was different to what we are noticing now. Before Bitcoin spot ETF was not approved whereas now it is approved and the inflow from these ETFs are holding the price of Bitcoin. Being said that a large chunk of Bitcoin is now going to institutional investors and big whales. The situation does not look problematic now but eventually these guys will decide the future price of Bitcoin.
You are right the market is overreacting and most of them are retail investors as they were always lose hands. Not much to say but the way things are now more panic selling will be witnessed by us like it used to be before.
Inam expecting Bitcoin to go below $50K once again and then it will again come back after a few months to where it was earlier.