Bitcoin may benefit significantly if the U.S.-Iran conflict extends over an extended period.

Macro strategist Mark Connors indicates that spending driven by war, escalating debt, and decreasing interest rates could bolster bitcoin.

(Noam Galai/Getty Images)

Key points:

• Macro strategist Mark Connors stated that an extended conflict between the U.S. and Iran could enhance bitcoin as war-related deficit spending increases liquidity and undermines the dollar.
• Accelerating U.S. debt and the likelihood of currency debasement are expected to drive investors toward alternative assets like bitcoin, according to Connors.
• The Federal Reserve’s necessity to maintain functioning Treasury markets, along with government borrowing, may result in lower interest rates and more accommodating liquidity conditions that have historically benefited bitcoin.

Bitcoin BTC$68,770.67 may increase if a potential U.S.-Iran confrontation prolongs for months, as increased government expenditure, rising debt, and lower interest rates create a favorable environment for the cryptocurrency, Mark Connors noted.

Financing wars is costly, and this often necessitates governments to incur additional debt, Connors explained, who previously served as the head of research at 3iQ and global head of portfolio and risk advisory at Credit Suisse. This raises the dollar supply in the economy, which reduces — or debases — the value of existing currency, thus benefiting non-dollar assets like bitcoin.

“Liquidity drives bitcoin,” remarked Connors, who currently operates his own bitcoin advisory firm named Risk Dimensions, in a discussion with CoinDesk. Should the conflict persist over the coming months, he anticipates that deficit spending will increase as the U.S. funds military initiatives. “If the war extends, that means more spending and increased deficit spending. This is positive for bitcoin.”

The U.S. national debt has already been escalating rapidly. Connors noted that federal debt has been increasing at approximately a 14% annualized rate since mid-2025. If this trend continues, debt could rise about 15% year-over-year.

“That represents debasement,” he stated.

Bitcoin seemed to reflect some of this trend on Monday. The cryptocurrency experienced gains overnight and into the U.S. morning as investors withdrew funds from equities and adjusted their portfolios in anticipation of a prolonged conflict. Since the initial U.S. strike on Iran, bitcoin has risen by 3.6%.

A surge in oil prices driven by war could complicate the situation by elevating inflation, Connors explained. However, he argued that even in a stagflationary scenario — characterized by slowing growth and rising prices — bitcoin could still find support.

In such a case, policymakers would likely prioritize financial stability and government funding over solely combating inflation.

Connors stated that the Federal Reserve effectively operates under an additional responsibility beyond its conventional objectives of stable prices and maximum employment: ensuring the smooth operation of financial markets, especially the Treasury market.

Authorities cannot permit disruptions similar to the 2019 repo market crisis or the regional bank failures witnessed in 2023 following aggressive interest rate hikes, he noted.

“The Fed must ensure the Treasury market operates smoothly,” Connors said.

This limitation may lead policymakers toward lower interest rates over time, particularly as the government moves toward issuing more short-term Treasury bills instead of long-term bonds. Reduced rates are also more likely if Kevin Walsh — chosen by President Trump partly for his dovish perspective — becomes the Fed chair in May, pending Senate confirmation.

As a larger portion of debt matures quickly, lowering short-term rates would directly lessen the government’s interest obligations.

If rates decrease while deficits continue to grow, liquidity conditions are likely to improve — a scenario Connors believes would favor bitcoin.

“When rates decline and debt continues to increase, that creates the environment where bitcoin typically performs well,” he stated.