After almost confirming this was bugged...I unlocked it today!
I really pushed through this level....very fast! Got good upgrades early, found the "true" square from the moving pack of 40 very quick. Destroyed the square that appears, then disappears into bullets (at this point the target is unhittable). Pretty sure this where everyone was struggling to pass. This time the target appeared longer than before it seemed. About 3-4 seconds. Before it seemed like the target was impossible to find and when it did, it would disappear in a split second, my hits appeared to do nothing. Then after 5 minutes the target wouldn't show up!
I did NOT encounter that today. I beat the level my first try today!
A restart of your PC, might help.
I also had my game window minimized, doubt it helps unlock it but it seemed a lot less chaotic and I was actually able to identify the target very quickly.
Hope this helps!
Please upvote if this helped you.