The Greek outfit travelled to Sweden full of confidence after a stunning 3-2 win over La Liga champions Atletico Madrid on matchday one.
But they were undone by two Markus Rosenberg goals on Wednesday in Malmo, who won their first group-stage match in Europe's premier club competition.
"We showed character, but we didn't win, and if you make mistakes in this competition you will lose," Michel said.
"The goals we conceded were not normal, but I don't want to blame any of my players.
"The Champions League is a competition with strong teams, and Malmo is a strong team. We already knew that.
"Now we have to try even harder in the future. We have got one good result, and one not so good."
All four sides in Group A have three points from two matches, leaving the group evenly poised despite the expected dominance of Atletico and Serie A champions Juventus.
Olympiacos goalkeeper Roberto Jimenez did not feel his side were outplayed and urged his team-mates to move on quickly.
"Malmo played a similar game to us," he said.
"They didn't play at a higher level, but they were stronger in defensive moments.
"We have to examine ourselves mentally because we are in the Champions League and cannot make these mistakes.
"We have the same ambition in the Champions League. Everyone has three points now. We start again."
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