Where will Bitcoin go after ‘The Halvening’?

Bitcoin is expected next month to undergo a “halvening.”

No, that’s not a yeast-driven phase of bread-baking. The odd word is crypto-speak for a recurring ritual in which the supply of newly created Bitcoins entering the market—the lottery-like reward paid to Bitcoin “miners” for sustaining the network—drops by half. This will be the third such dropoff, which occurs about every four years.

For market mystics attempting to divine cryptocurrency price movements, the affair rouses a great deal of speculation. A simplistic analysis of the levers of supply and demand might suggest that Bitcoins will become more valuable after the halvening. The so-called block reward, the payout bequeathed to one lucky, random Bitcoin miner roughly every 10 minutes, is poised to drop from 12.5 Bitcoins per block to 6.25 Bitcoins. Half as many new bitcoins entering the market means greater scarcity for the lot. (Or, more technically, a reduced inflation rate.)

Decreased supply, same demand: Price go up, right?

History supports this view. The last two Bitcoin halving events—on Nov. 28, 2012 and July 9, 2016—preceded major price runups. A year to the date after the first halvening, Bitcoin’s price had exploded more than 8,000% to more than $1,000. A year to the date after the second halvening, the price had popped 280% to more than $2,500. (A bubble popped in between, and the price slumped for a year and a half after fall 2013.)

Even as the global economy careens toward recession, some bitcoin bulls can be heard roaring above the fray. In January, before pandemic gripped the globe, one analyst predicted Bitcoin could reach $100,000 at the height of its next bull run. Zac Prince, CEO of BlockFi, a digital asset investment firm, also believes the price of Bitcoin will surge well above $7,700, the price at which Bitcoin trades today, in a year’s time. “I don’t mean a little higher, I mean significantly higher,” he says, noting that he has “personally put my money where my mouth is.”

But past performance does not ensure future results. “Just because there were two bull runs before doesn’t mean it’s gonna happen again,” says Sunayna Tuteja, managing director of digital assets at TD Ameritrade, a brokerage in the process of being absorbed in a $26 billion deal by onetime rival Charles Schwab. The counterargument: Traders are well aware a halvening is slated for May 12, and the current price of Bitcoin already reflects the upside.

There’s more reason to be skeptical of an imminent boom. Economic shutdowns related to the coronavirus pandemic have caused widespread cash and credit crunches. Risky bets, like cryptocurrency, are unlikely to attract eager investors in such dire times. In a research note, Meltem Demirors, chief strategy officer of UK-based digital asset investment firm CoinShares, writes that “just like the rest of the economy, the Bitcoin rally around the halving is cancelled until further notice.”

Without a rally, Bitcoin miners will see their revenues halved. Yet this topline trauma may not be as apocalyptic as it sounds, at least immediately. Many Bitcoin miners are relocating their servers from the dry, Mongolian desert regions of China to the rainy Southwestern provinces, like Yunnan, just in time for a months-long rainy season, according to Daniel Yan of Singapore-based Matrixport, a banking spinout of mining hardware manufacturer Bitmain. A surplus of rushing water down south will make hydroelectric power cheaper, reducing miners’ expenses and potentially offsetting the revenue hit.

Adam Goldberg, a venture capitalist formerly at Lightspeed who has since cofounded the fund Standard Crypto, compares the impact of this year’s monsoon season to “a bailout for miners.” That should help keep the vast majority of Bitcoin miners afloat at least till the fall. By that point, the extent of the pandemic’s wreckage and the health of world economies should become clearer.

Until then, make it rain, mother nature.

Robert Hackett

@roberthackett

robert.hackett@fortune.com

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This edition of The Ledger was curated by David Z. Morris. Contact him at david.morris@fortune.com.