Key takeaways:
Bitcoin (BTC) climbed toward $105,000 on June 6 after plunging to its lowest level in four weeks the previous day.
Traders questioned whether the sharp decline had been coordinated, especially following reports that US President Trump and Chinese President Xi Jinping had resumed discussions over import tariffs.
The reasons behind Bitcoin’s sudden drop on June 5 might never be fully clarified. Still, several contributing factors emerged, including fears of a potential economic recession, continued uncertainty surrounding the US Strategic Bitcoin Reserves, and speculation that custodians might be engaging in re-hypothecation practices.
If these concerns are valid, a quick return to the $110,000 level appears unlikely.
Hyperliquid whale and Elon Musk’s impact on Bitcoin
According to some analysts, including X user SuperBitcoinBro, the drop to $100,430 on June 5 was mainly triggered by excessive bullish leverage from “degenerate” traders. These leveraged bets followed the liquidation of a large position held by the so-called Hyperliquid whale near $104,000.
This trader, known by the pseudonym “James Wynn,” reportedly incurred losses exceeding $100 million within a week.
SuperBitcoinBro noted that traders expecting an immediate rebound in Bitcoin’s price were blindsided, as experienced market participants had already anticipated the ensuing buying pressure. This maneuver, often referred to as a “bull trap,” thrives on overconfidence from buyers, especially after an unexpected price dip.
While the public feud between Elon Musk and US President Donald Trump has drawn considerable attention, linking the dispute directly to Bitcoin’s decline is difficult. The S&P 500 closed down just 0.55% on June 5, a modest move that doesn’t suggest widespread market distress.
Economic recession risks and speculation on Bitcoin custody
Bitcoin traders remain concerned that a looming global economic slowdown could lead investors to become more risk-averse. Data from the US Department of Labor showed that weekly unemployment claims rose to their highest level in eight months during the final full week of May.
Additionally, US Federal Reserve Governor Adriana Kugler stated that tariffs pose “downside risks to employment and output growth.”
Investor sentiment was further shaken by disappointment with Michael Saylor and his firm Strategy after they declined to disclose their onchain Bitcoin addresses.
This lack of transparency sparked renewed speculation that some custodians might be engaging in re-hypothecation, using the same Bitcoin collateral multiple times to secure different financial commitments.
We just updated our #Bitcoin-backed loan agreement to make it crystal clear:
Your #Bitcoin is never rehypothecated on @Strike.
Never has been, never will be. pic.twitter.com/dZqsIuBZao
— Jack Mallers (@jackmallers) June 4, 2025
There is no evidence of wrongdoing among major custodians such as Coinbase Custody or Fidelity Digital Assets, both of which are subject to regular audits. More likely, investors are searching for reasons behind Bitcoin’s price weakness despite continued inflows from institutional buyers like Strategy, GameStop, Metaplanet, Semler Scientific, and Méliuz.
Related: The secret map whales use to liquidate you (Learn how to read it)
Investor frustration has grown as three months have passed since the announcement of the US Strategic Bitcoin Reserves, with no meaningful developments since.
Similarly, although there have been incremental regulatory changes allowing banks to offer digital asset custody, spot exchange-traded fund (ETF) products still lack key features such as in-kind redemptions and staking mechanisms.
Fundamentally, the same concerns that triggered Bitcoin’s drop to a low of $100,430 on June 5 remain unresolved. Traders continue to worry about a potential economic recession, the possibility of custodians engaging in re-hypothecation of Bitcoin, and the ongoing lack of clarity regarding the role and implementation of the US Strategic Bitcoin Reserves.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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