Bitcoin could acquire if a possible U.S.-Iran battle stretches on for months as greater authorities spending, rising debt and decrease rates of interest create situations which have traditionally supported the cryptocurrency, in line with macrostrategist Mark Connors.
Wars are costly, and financing them sometimes requires governments to situation extra debt, mentioned Connors, previously the top of analysis at 3iQ and world head of portfolio and danger advisory at Credit score Suisse. That will increase the provision of {dollars} within the monetary system, reducing — or debasing — the worth of the present circulation, and tending to learn non-dollar property like bitcoin.
“Liquidity drives bitcoin,” mentioned Connors, who now has his personal bitcoin advisory agency known as Threat Dimensions, in an interview with CoinDesk. If the battle extends into the following a number of months, he expects deficit spending to speed up because the U.S. funds army operations. “If the struggle runs longer, meaning extra spending and extra deficit spending. That’s constructive for bitcoin.”
The U.S. debt load has already been rising quickly. Connors mentioned federal debt has been rising at roughly a 14% annualized tempo since mid-2025. If the development continues, the debt might improve about 15% year-over-year.
“That’s debasement,” he mentioned.
Bitcoin appeared to mirror a few of that dynamic on Monday. The cryptocurrency rallied in a single day and into the U.S. morning as buyers pulled cash out of equities and repositioned portfolios for the potential for a protracted battle. Because the first U.S. strike on Iran, bitcoin has gained 3.6%.
A war-driven surge in oil costs might complicate the outlook by pushing inflation greater, Connors mentioned. However he argued that even a stagflationary surroundings — the place development slows whereas costs rise — might help bitcoin.
In that state of affairs, policymakers would seemingly prioritize monetary stability and authorities financing over combating inflation alone.
Connors mentioned the Federal Reserve successfully operates underneath an extra mandate past its conventional objectives of steady costs and most employment: sustaining the sleek functioning of economic markets, significantly the Treasury market.
Authorities can’t permit disruptions just like the 2019 repo market disaster or the regional financial institution failures seen in 2023 after aggressive fee hikes, he mentioned.
“The Fed has to verify the Treasury market features,” Connors mentioned.
That constraint could push policymakers towards decrease rates of interest over time, particularly as the federal government shifts towards issuing extra short-term Treasury payments moderately than long-term bonds. Decrease charges are additionally extra seemingly if Kevin Walsh — picked by President Trump partly for his dovish stance — turns into chair of the Fed in Could, pending affirmation by the Senate.
With a bigger share of debt rolling over rapidly, reducing short-term charges would instantly scale back the federal government’s curiosity prices.
If charges fall whereas deficits proceed to develop, liquidity situations would seemingly enhance — a mixture Connors believes would favor bitcoin.
“When charges go decrease and debt retains rising, that’s the backdrop the place bitcoin tends to carry out effectively,” he mentioned.
