Bitcoin Rebounds Toward $105K — But Is a Bull Trap Looming?
Bitcoin surged toward $105,000 on June 6, recovering after plunging to a four-week low just a day earlier. This sharp reversal has left traders questioning whether the prior downturn was a coordinated move, especially amid reports that U.S. President Donald Trump and Chinese President Xi Jinping had resumed discussions on import tariffs.
The precise cause of Bitcoin’s sudden decline on June 5 remains unclear. However, several factors appear to have contributed, including fears of an impending economic recession, ongoing uncertainty around the U.S. Strategic Bitcoin Reserves, and speculation that some custodians may be involved in re-hypothecation — a practice where the same Bitcoin collateral is used multiple times to back various financial positions.
Given these unresolved concerns, a rapid push back to the $110,000 mark seems unlikely.
Hyperliquid Whale Liquidation and Elon Musk’s Influence
Analysts, including X (formerly Twitter) user SuperBitcoinBro, suggest that the plunge to $100,430 on June 5 was largely driven by excessive bullish leverage taken by so-called “degenerate” traders. This cascade of liquidations followed the unwinding of a large position held by the so-called Hyperliquid whale around the $104,000 level.
The trader behind this massive position, pseudonymously known as “James Wynn,” reportedly suffered losses exceeding $100 million over the past week.
SuperBitcoinBro highlighted that traders betting on an immediate Bitcoin rebound were caught off guard, as experienced market players had already anticipated the subsequent buying pressure. This dynamic, often described as a bull trap, preys on overly confident buyers following an unexpected price drop.
Meanwhile, the public feud between Elon Musk and President Trump has garnered widespread media attention. However, linking this political clash directly to Bitcoin’s recent price movements is tenuous. On June 5, the S&P 500 closed just 0.55% lower — a relatively modest decline that does not suggest broad-based market panic.
Rising Recession Fears and Custody Speculation Weigh on Sentiment
Bitcoin traders remain wary that a potential global economic downturn could lead to a more risk-averse investment environment. Data from the U.S. Department of Labor revealed that weekly unemployment claims reached an eight-month high during the final full week of May, adding to recessionary concerns.
Additionally, U.S. Federal Reserve Governor Adriana Kugler cautioned that tariffs could pose “downside risks to employment and output growth,” further dampening investor sentiment.
Adding to the unease was disappointment with Michael Saylor and his company Strategy, which recently declined to disclose their on-chain Bitcoin addresses. This lack of transparency has reignited speculation that certain custodians may be engaging in re-hypothecation, raising fears that the same Bitcoin collateral is being used to back multiple financial commitments.
It is important to note that there is no current evidence of malpractice among major custodians such as Coinbase Custody or Fidelity Digital Assets, both of which undergo regular third-party audits. Nevertheless, market participants remain eager to identify reasons behind Bitcoin’s price weakness, particularly in the face of sustained institutional buying from firms like Strategy, GameStop, Metaplanet, Semler Scientific, and Méliuz.
Frustration among investors has also grown due to the lack of updates regarding the U.S. Strategic Bitcoin Reserves, which were announced three months ago but have yet to see meaningful progress.
Regulatory Hurdles and Lingering Uncertainty
While incremental regulatory advancements have allowed banks to offer digital asset custody, many spot exchange-traded fund (ETF) products remain limited. Key features such as in-kind redemptions and staking mechanisms are still absent, adding to market uncertainty.
At its core, the same concerns that triggered Bitcoin’s sharp decline to $100,430 on June 5 remain unresolved. Traders continue to worry about a looming economic recession, the potential for custodians to engage in re-hypothecation of Bitcoin assets, and the ongoing lack of clarity regarding the role and execution of the U.S. Strategic Bitcoin Reserves.
Until these issues are addressed, Bitcoin’s path to sustained recovery may remain fraught with volatility.
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Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Cryptocurrency investments are subject to market risks, and individuals should seek professional advice before making any investment decisions.
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