Bitcoin showed signs of recovery on June 6, moving back toward the $105,000 level just a day after dipping to a four-week low.
The sudden plunge sparked debate among traders, with some suspecting the move was orchestrated. This came amid reports that U.S. President Donald Trump and Chinese President Xi Jinping had restarted discussions about import tariffs.
While the exact cause of Bitcoin’s sharp drop remains unclear, a few key factors emerged.
Market participants expressed growing concern about a potential recession, persistent uncertainty surrounding the U.S. Strategic Bitcoin Reserves, and rumors that some custodians might be involved in re-hypothecation practices.
If those fears prove justified, Bitcoin’s return to the $110,000 range could face resistance.
Leverage and Liquidation Blamed for Price Crash
Analysts suggested that overleveraged traders played a major role in the downturn.
One such trader, known as the Hyperliquid whale and operating under the pseudonym James Wynn, reportedly suffered losses exceeding $100 million after liquidating a position near $104,000.
X user SuperBitcoinBro pointed to excessive bullish leverage from retail traders as a catalyst.
“Degenerate” bets, he argued, were placed too soon in anticipation of a bounce, only to be caught in what’s commonly referred to as a “bull trap.”
Traders expecting an immediate rebound were ultimately disappointed.
More seasoned investors had anticipated the buying frenzy and used it to their advantage, catching less experienced participants off guard.
Despite Elon Musk’s ongoing public feud with Donald Trump, no direct link has been established between the dispute and Bitcoin’s decline.
The S&P 500’s modest drop of 0.55% on June 5 also suggests that broader market sentiment wasn’t in full panic mode.
Recession Jitters and Custody Transparency Worries
Bitcoin’s struggles also reflect broader economic concerns.
New data from the U.S. Department of Labor showed jobless claims rising to an eight-month high in late May.
Federal Reserve Governor Adriana Kugler added to the caution, warning that tariffs could reduce employment and overall economic growth.
Investor frustration was further inflamed when Michael Saylor’s firm, Strategy, declined to disclose its onchain Bitcoin addresses.
The lack of transparency reignited fears about re-hypothecation, a controversial practice where the same Bitcoin holdings could be used multiple times as collateral.
There is currently no public evidence that regulated custodians like Fidelity or Coinbase Custody are participating in such behavior.
Both firms undergo regular audits.
Nevertheless, uncertainty remains high, especially given the lack of updates on the U.S. Strategic Bitcoin Reserves program, which was announced three months ago.
Similarly, while regulators have gradually approved digital asset custody for banks, there has been no major progress on improving spot Bitcoin ETFs.
Many still lack essential components like in-kind redemptions and staking mechanisms.
The June 5 price drop to $100,430 served as a sharp reminder that unresolved risks continue to weigh heavily on the market.