If I intend to hold Bitcoin long term & the stocks drop below my invested amount do I lose the money or can I still hold it in hope it goes back? Example; If I buy $500 worth of Bitcoin and the stocks drop from say 4,000 to 3,200 - is my entire investment lost completely and I have to start again ?

Or is it now just negative (not worth anything) and if the stocks rise back up do I regain what I had without having to do anything ?

Next day it is at 3,600 so now I still have $100 ?
If you buy $500 worth of bitcoin when the price is $4000, then you would own 0.125 bitcoin. If the price drops to $3200, then you still own 0.125 bitcoin, which you could sell for $400. You do not "lose" your $500 investment, it just becomes worth less (in some sense you "lost" $100, but your loss is only realized if you sell your bitcoin at the $3200 price). If you do nothing and the price goes up again, you could then sell it for more.