Why do people sell when price is going down?

I am serious. I don't get it. i am a bit naive though when it comes to understand how markets work.

So you have some position in some coin. It doesn't matter which one. Some fat whale dumps a big pile, initiating the price to go down.

All of a sudden, people start selling in panic, causing a spiralling price free fall.

I don't understand why people do that. Why sell your position when the price is obviously not favorable? Why not just wait it out?

The only reason I could think of is that they are somehow forced to sell. But that only makes sense if you

• don't think the market wil recover anymore and will loose it all. This seems the least plausible explanation.

• can't wait it out (you need your money short term). Are really so many people short-termed?

• have pending loans with contracts getting auto-liquidated. They borrowed at some point and their loans are timing out just when the downturn starts. While this seems to be the most plausible reason - are there really so many investors doing this trading thing? I would guess a lot more are just holders. Just like with conventional bank accounts. Most people just hold money there. Only a few actually trade, loan, invest etc. If this analysis holds then how can the few traders which are having their terms liquidated cause the price to fall that much, if the others aren't doing anything?

I guess something in this analysis must be wrong, or this wouldn't be happening every time.