bitcoin may win if a potential conflict between the United States and Iran drags on for months as higher government spending, rising debt and lower interest rates create conditions that have historically supported the cryptocurrency, according to macro strategist Mark Connors.
Wars are expensive and financing them typically requires governments to issue more debt, said Connors, former head of research at 3iQ and global head of portfolio and risk advisory at Credit Suisse. That increases the supply of dollars in the financial system, reducing (or degrading) the value of existing circulation and tending to benefit non-dollar assets like bitcoin.
“Liquidity drives bitcoin,” Connors, who now has his own bitcoin advisory firm called Risk Dimensions, said in an interview with CoinDesk. If the conflict drags on over the next few months, expect deficit spending to accelerate as the United States funds military operations. “If the war lasts longer, that means more spending and more deficit spending. That’s constructive for bitcoin.”
The American debt burden has already been growing rapidly. Connors said the federal debt has increased at an annualized rate of about 14% since mid-2025. If the trend continues, the debt could increase about 15% year over year.
“That’s degradation,” he said.
Bitcoin seemed to reflect some of that dynamic on Monday. The cryptocurrency rallied overnight and into the morning in the US as investors pulled money out of stocks and repositioned their portfolios on the prospect of a prolonged conflict. Since the first US attack on Iran, bitcoin has gained 3.6%.
A war-driven rise in oil prices could complicate the outlook by raising inflation, Connors said. But he argued that even a stagflationary environment – where growth slows while prices rise – could support bitcoin.
In that scenario, authorities would likely prioritize financial stability and government financing over fighting inflation alone.
Connors said the Federal Reserve effectively operates under an additional mandate beyond its traditional goals of stable prices and maximum employment: maintaining the proper functioning of financial markets, particularly the Treasury market.
Authorities cannot allow disruptions like the 2019 repo market crisis or the regional bank bankruptcies seen in 2023 after aggressive rate hikes, he said.
“The Fed has to make sure the Treasury market works,” Connors said.
That restriction may push authorities to lower interest rates over time, especially as the government moves toward issuing more short-term Treasury bills rather than longer-term bonds. Rates are also more likely to fall if Kevin Walsh (picked by President Trump in part for his dovish stance) becomes chairman of the Federal Reserve in May, pending Senate confirmation.
With a larger share of debt being rolled over quickly, lowering short-term rates would directly reduce the government’s interest costs.
If rates fall as deficits continue to expand, liquidity conditions would likely improve, a combination that Connors believes would favor bitcoin.
“When rates go down and debt continues to rise, that’s the context in which bitcoin tends to perform well,” he said.
