In a redux of trading from the early days of the coronavirus crisis in March, bitcoin tumbled Thursday in tandem with a sell-off on Wall Street – rekindling an ongoing debate over the cryptocurrency's use as a store of value.

Prices for bitcoin fell 6.37% to about $9,100, as the Standard & Poor's 500 Index of large U.S. stocks lost 5.7%.

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The slide in stocks came a day after the Federal Reserve provided an unexpectedly dour assessment of the outlook for the U.S. economy, and investors speculated a possible uptick in new cases might slow the pace of the recovery. Some investors may have also sold bitcoin, still seen as a risky asset despite its 30% gain for the year to date.

“I think the general negative sentiment of traditional markets affects bitcoin," Sasha Goldberg, senior trader for Efficient Frontier Markets, a digital asset quant fund, told CoinDesk's Daniel Cawrey.

Thursday's plunge in bitcoin prices was nowhere near the 39% wipeout on March 12, when it became clear to investors across all markets just how devastating of a toll the coronavirus was likely to take on the economy.

The day's session kindled chatter anew among cryptocurrency analysts over whether bitcoin is mostly uncorrelated with traditional assets, or whether it should trade as an inflation hedge like gold, or in sync with riskier assets like stocks. 

"The institutionalization of crypto (i.e. same firms that trade stocks and other assets, trading crypto), will lead to higher correlation, especially during extreme risk on/off scenarios such as margin calls," said Denis Vinokourov, head of research at Bequant, a London-based prime brokerage to cryptocurrency investment firms.  

Thursday's price decline came just a day after the Fed indicated that joblessness would remain elevated for at least three years. That means Fed officials expect to keep interest rates close to zero through 2022, while pumping at least $120 billion a month of freshly created money  into the financial system for the foreseeable future. If bitcoin is an inflation hedge, then loose monetary policy should theoretically be good for the price. 

Larry Kudlow, one of President Donald Trump's top economic advisers, told Fox Business Network in an interview Thursday that the Federal Reserve's balance sheet's "gonna rise by about $10 trillion by year-end." Just in 2020 alone, the Fed's total assets have climbed by about $3 trillion to $7.2 trillion.   

"You know, I don't know why the market has sold off," Kudlow said Thursday.  

Earlier in the day, Stack Funds, a provider of cryptocurrency trackers and index funds, had written in a weekly report that "there was a higher probability for bitcoin to swing upside in the coming week." It went so far as to predict that bitcoin might be on the cusp of a "potential move upside to $40,000," or more than quadruple the current price level. 

Instead bitcoin took a nosedive as the mood darkened on Wall Street. 

"Bitcoin, along with the entire emerging digital asset class, are very much considered risky assets," Mati Greenspan, founder of the research firm Quantum Economics, wrote Thursday in an email to subscribers.

Bitcoin is trading well below its price average for the past 50 and 100 days, typically a bearish signal.

As reported by Cawrey, the U.S. Dollar Index rose 0.4% off its three-month lows Thursday, potentially indicating that investors were looking to classic safe-haven assets, which include cash as well as gold. Prices for the yellow metal were down Thursday, but less than 1%. 

Since March, bitcoin's price has shown a weak but consistent correlation with both gold and stock prices. According to Greenspan, that might be a sign of bitcoin's increasing adoption by investors.  

"The fact that bitcoin had any reaction at all to the Fed yesterday is a clear sign that either a) institutional money is playing a much larger role in the market these days, or b) retail traders are getting more savvy and reacting more to their surroundings," Greenspan wrote. "Either way, the market is growing up fast."

BTC: Price: $9,444 (BPI) | 24-Hr High: $9,810 | 24-Hr Low: $9,108

Trend: Bitcoin is back up near $9,450 at press time, having put in a low of $9,112 during the U.S. trading hours on Thursday. 

The cryptocurrency fell by over 6% as stock markets across the globe cratered on renewed growth concerns and fears that a second wave of the coronavirus pandemic would wreak further economic havoc. 

The risk sentiment, however, looks to have stabilized somewhat over the last few hours with futures tied to the S&P 500 gaining over 1%. European equities, too, are reporting modest gains. Bitcoin could rebound further if the stock market recovery gathers pace.

However, the odds look stacked in the other direction.

The U.S. bond market has priced out the prospects of a V-shaped economic recovery. Meanwhile, a second wave of coronavirus seems to have hit the U.S. states of Texas, Florida and California, even as some emerging market economies are still experiencing their first waves. 

There are also concerns that the stock market has risen too far from the lows seen in March on the back of unprecedented liquidity injections by central banks across the globe, and has lost touch with the reality that the economy may take years to recover. As a result, equities are likely to remain under pressure in the short term and keep bitcoin on the defensive. 

The cryptocurrency's technical charts are also painting a bearish picture. Thursday's decline validated a bearish divergence of the three-day chart's relative strength index and marked a downside break of the eight-day restricted trading range between $9,350 and $10,000. 

The range breakdown, coupled with sub-zero reading on the MACD, indicate scope for a drop to support at $8,630 (May 27 low). On the higher side, $10,000 is still the level to beat for the bulls.