Normally, little is unexpected concerning the regular, pre-programmed adjustment of the Bitcoin network’s mining reward size, otherwise known as halving. Baked into the digital currency’s original protocol, the anti-inflationary mechanism gets triggered once every 210,000 blocks mined — or roughly every four years — providing all the interested parties with ample notice and time to buckle up.

Throughout Bitcoin’s (BTC) rather short history, halvings invariably foreshadowed massive rallies in crypto markets. The upcoming event, however, is unprecedented, as it will take place in the middle of a crisis that has affected just about every aspect of the global economy. How did the coronavirus-induced disruption play out in various sectors of the crypto industry, and what difference will it make for its pre- and post-halving state?

Mining industry: Taking one for the team

For the crypto mining sector, the halving is a source of substantial pressure even without a global health crisis lurking in the background. As the reward for adding a block to the Bitcoin blockchain is reduced by half, miners are left to count on the corresponding surge in coin prices or a higher transaction volume to keep their operations profitable. In the long run, they must create new efficiencies in order to stay abreast of the post-halving environment. Under normal circumstances, however, the expected gains from the ensuing surge of prices make up for the reward cut.

Ahead of the upcoming halving, some cryptocurrency industry players were conspicuously bullish on mining. For one, in February, the Nasdaq-traded crypto firm Riot Blockchain announced it was doubling down on the mining arm of its business as it shut down its RiotX exchange platform. The company’s strategy clearly didn’t factor in the gravity of the coronavirus situation: Less than two months after the announcement, Riot Blockchain was scrambling to keep its mining operation afloat by partially relocating it from Oklahoma to upstate New York.

By late March, the Bitcoin network’s hash rate took a dramatic dip, prompting observers to suspect that mass capitulation of smaller-sized mining operations could be a possible reason. Bitcoin’s price sinking to as low as $3,600 and the aftermath of the Black Thursday market crash have likely rendered mining unprofitable for those who didn’t enjoy sufficient economies of scale.

Qingfei Li, the senior vice president of mining pool F2Pool, told Cointelegraph that the halving could present another blow for many industry participants who have barely bounced back after the coronavirus-prompted decline:

“Bitcoin price has fallen sharply last month, leading to part of mining farm owners turning off their mining machines. They reopened their farms recently as the price increased, but they will suffer a harder period of time after the halving. Those smaller mining operations lack electric resources, and their mining cost will be higher than [that of] the whale farm owners, who will have cheaper electric resources when the flood season comes.”

Li predicted that some smaller mining operations will fold shortly after the halving. Jay Hao, the CEO of cryptocurrency exchange OKEx, also opined that the halving could exacerbate the misfortunes of some Bitcoin miners, leading to a temporary hash rate decline:

“In the short run, there could be miners on a smaller scale not being able to continue in the game, hence the hash rate could even potentially go lower. Along with the enhanced equipment and efficiency, the hash rate would gradually pick up again.”

The adjacent mining hardware manufacturing sector took some casualties as well, as the disrupted supply chains and the customers struggling with a market downturn and lockdown orders contributed to lost revenues pre-halving and, most likely, in its aftermath.

Market dynamics

In the absence of a counterfactual — that is, the knowledge of how the crypto markets would have behaved had the COVID-19 pandemic never occurred — it is impossible to assess to what extent the virus is responsible for the current state of affairs. In the virus-free world, would Bitcoin have cost $3,000 or more on the day before the pandemic? No one will know now. However, what can be observed is the performance of digital currencies amid a major global crisis in comparison to other assets.

In the first weeks of the outbreak and resulting economic calamity, a notion gained traction in the crypto community that the coronavirus presented the ultimate test of Bitcoin’s “safe haven” status. In order to pass it, BTC’s valuation should have remained strong against the plummeting stock market. When Bitcoin fell, too, the mild comedown could be felt in the air: Crypto did not immediately become mainstream investors’ primary last resort.

Related: Coronavirus Has Put Bitcoin’s Safe Haven Narrative to the Test

Yet, the ensuing weeks of recovery demonstrated that Bitcoin was outperforming many other asset types on the rebound. By the end of April, the original cryptocurrency was trading above $8,000 and topped both the dollar and stocks on current-year gains. Only gold, Bitcoin’s nemesis in the fight for the safe-haven distinction, remained out of the reach.

The narrative shift

Perhaps even more consequential in the grand scheme of things has been the shifting of frames surrounding the discussion of the monetary response to the global economic crisis. With many governments resorting to the time-tested, inflation-fraught technique of quantitative easing — which is essentially just printing money — the public has been reminded of Bitcoin’s fundamental competitive advantage: the scarcity of supply.

When central banks worldwide spur inflation by attempting to stimulate their inhibited economies with huge cash influxes, Bitcoin will undergo a pronouncedly deflationary event. One would be hard-pressed to think of a more opportune contrast in the middle of yet another crisis that will certainly prompt many to critically reassess the incumbent financial system. Mati Greenspan, the founder of investment analysis and advisory firm Quantum Economics, observed to Cointelegraph:

“By now, [the halving] has become the center of conversation for all crypto advocates. Not necessarily as a factor that directly impacts prices in the short term but more as an auspicious event that highlights Bitcoin’s unique monetary structure. The halving displays to the entire world the difference between sound money and the stuff gradually eroding in their bank account.”

OKEx’s Hao agreed that the pandemic could sensitize investors to Bitcoin’s edge as an instrument of hedging against the risks inherent to other asset classes:

“While the global economy has been affected by COVID-19 and got into depression, we have heard a lot of central banks considering alternative non-currency asset classes. Gold and commodities have always been a welcome option. However, they could be of limitation to hedge the risk during the global lockdown initiated by COVID-19. Cryptocurrency, especially BTC, then becomes an alternative solution in terms of hedging, especially facing the economic issues generated by the pandemic.”

Hao said that Bitcoin still lacks gold’s time-tested reputation as a safe storage of value, but catastrophic events like the one the world is currently living through can be instrumental in building such a reputation.