It's understandable to be worried, but take a deep breath! Burying themselves in the sand is a common behavior for pygmy waspfish, especially when they're new to an environment. Here's a few things on what it could be.
Stress of Moving: Even though you know the fish and built trust, a new tank is a big change. Burrowing is a natural way for them to feel secure.
Finding a Burrow: Waspfish are known to burrow and make their home in the sand. He might be exploring to pick his permanent spot.
Sleeping: They can sleep partially buried in the sand. If his breathing seems regular, this might be the case.
But to try and put your mind at ease try some of these things.

Everything is scary for new fish especially if there moving from one spot to the other. My yellow headed jawfish was kinda acting like that at first and he eventually found his home. Well making multiple homes haha!
Give Him Time: The best course of action might be to simply leave him alone and let him adjust. Reduce activity near the tank to minimize stress.
Target Feeding: You mentioned you target feed him already. Try offering him some food near the sandbed to encourage him to come out.
Monitor Water Parameters: Keep an eye on your water parameters, even though they were good initially. New tank setups can fluctuate.
Wait and Observe: If he's still buried but responsive after a day or two, that's likely normal. If he's not responsive or shows other concerning signs, then there might be an issue.
I hope he ends up adapting to your tank well