Bitcoin BTC$68,856.19 may gain if a potential U.S.-Iran conflict stretches on for months as higher government spending, rising debt and lower interest rates create conditions that have historically supported the cryptocurrency, according to macrostrategist Mark Connors.

Wars are expensive, and financing them typically requires governments to issue more debt, said Connors, formerly the 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, lowering — or debasing — the value of the existing circulation, and tending to benefit non-dollar assets like bitcoin.

“Liquidity drives bitcoin,” said Connors, who now has his own bitcoin advisory firm called Risk Dimensions, in an interview with CoinDesk. If the conflict extends into the next several months, he expects deficit spending to accelerate as the U.S. finances military operations. “If the war runs longer, that means more spending and more deficit spending. That’s constructive for bitcoin.”

The U.S. debt load has already been growing rapidly. Connors said federal debt has been rising at roughly a 14% annualized pace since mid-2025. If the trend continues, the debt could increase about 15% year-over-year.

“That’s debasement,” he said.

Bitcoin appeared to reflect some of that dynamic on Monday. The cryptocurrency rallied overnight and into the U.S. morning as investors pulled money out of equities and repositioned portfolios for the possibility of a prolonged conflict. Since the first U.S. strike on Iran, bitcoin has gained 3.6%.

A war-driven surge 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, policymakers 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 smooth functioning of financial markets, particularly the Treasury 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 Treasury market functions,” Connors said.

That constraint may push policymakers toward lower interest rates over time, especially as the government shifts toward issuing more short-term Treasury bills rather than long-term bonds. Lower rates are also more likely if Kevin Walsh — picked by President Trump partly for his dovish stance — becomes chair of the Fed in May, pending confirmation by the Senate.

With a larger share of debt rolling over quickly, lowering short-term rates would directly reduce the government’s interest costs.

If rates fall while deficits continue to expand, liquidity conditions would likely improve — a combination Connors believes would favor bitcoin.

“When rates go lower and debt keeps rising, that’s the backdrop where bitcoin tends to perform well,” he said.