Bitcoin could win if a potential conflict between the United States and Iran drags on for months, as higher government spending, growing debt and lower interest rates create conditions that have historically supported the cryptocurrency, according to macrostrategist Mark Connors.
Wars are expensive and financing them usually 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. This increases the supply of dollars in the financial system, reducing – or devaluing – the value of existing circulation and tending to benefit non-monetary assets like bitcoin.
“Liquidity is driving Bitcoin,” Connors, who now has his own Bitcoin consulting firm called Risk Dimensions, said in an interview with CoinDesk. If the conflict drags on in the coming months, he expects deficit spending to accelerate as the United States funds its military operations. “If the war lasts longer, that means more spending and more deficits. That’s constructive for Bitcoin.”
The US debt burden has already increased rapidly. Connors said the federal debt has grown at an annualized rate of about 14% since mid-2025. If the trend continues, debt could increase by around 15% over one year.
“It’s degradation,” he said.
Bitcoin appeared to reflect some of this momentum on Monday. The cryptocurrency rallied overnight and into the U.S. morning as investors pulled money out of stocks and repositioned their portfolios in anticipation of a possible prolonged conflict. Since the first US strike against Iran, bitcoin has gained 3.6%.
A war-driven rise in oil prices could complicate the outlook by pushing inflation higher, Connors said. But he argued that even a stagflationary environment – where growth slows while prices rise – could support bitcoin.
In this scenario, policymakers would likely prioritize financial stability and public financing over just fighting inflation.
Connors said the Federal Reserve effectively operates under an additional mandate beyond its traditional goals of price stability and maximum employment: to maintain the smooth functioning of financial markets, particularly the Treasury.
Authorities cannot allow disruptions like the 2019 pension market crisis or the regional bank failures seen in 2023 after aggressive rate hikes, he said.
“The Fed needs to make sure the Treasury market works,” Connors said.
This constraint could push policymakers to lower interest rates over time, especially as the government moves toward issuing short-term Treasury bills rather than long-term bonds. A rate cut is also more likely if Kevin Walsh – chosen by President Trump in part for his dovish stance – becomes Fed chairman in May, pending Senate confirmation.
With a larger share of debt revolving rapidly, lowering short-term rates would directly reduce the government’s interest costs.
If rates fall while deficits continue to widen, liquidity conditions would likely improve – a combination that Connors believes would favor Bitcoin.
“When rates are falling and debt continues to rise, that’s where bitcoin tends to perform well,” he said.
