Bitcoin could gain if a potential U.S.-Iran conflict 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. It increases the supply of dollars in the financial system, lowers – or degrades – the value of the existing circulation and tends 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 into the next several months, he expects deficit spending to accelerate as the United States funds military operations. “If the war goes on longer, it means more spending and more deficit spending. That’s constructive for bitcoin.”
The US debt burden has already grown rapidly. Connors said the federal debt has increased at about a 14% annual pace since mid-2025. If the trend continues, debt could increase by around 15% year-on-year.
“It’s demeaning,” he said.
Bitcoin appeared to reflect some of this momentum on Monday. The cryptocurrency rose overnight and into the US morning as investors pulled money out of stocks and repositioned portfolios for the possibility of a prolonged conflict. Since the first US attack on Iran, bitcoin has risen 3.6 percent.
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 that scenario, politicians are likely to prioritize financial stability and government funding over fighting inflation alone.
Connors said the Federal Reserve is effectively operating under an additional mandate beyond its traditional goals of stable prices and maximum employment: maintaining well-functioning financial markets, particularly the financial market.
Authorities cannot allow disruptions like the 2019 repo market crisis or the regional bank failures seen in 2023 after aggressive rate hikes, he said.
“The Fed has to make sure the financial market is working,” Connors said.
This constraint could push policymakers toward lower interest rates over time, especially as the government shifts to issuing more short-term government bonds rather than long-term bonds. Lower rates are 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 the debt rolling over quickly, lowering short-term interest rates will directly reduce the government’s interest costs.
If rates fall while deficits continue to grow, liquidity conditions are likely to improve — a combination that Connors believes will favor bitcoin.
“When interest rates go down and debt keeps going up, that’s the backdrop against which bitcoin tends to do well,” he said.
