Bitcoin Could Thrive Amid Prolonged U.S. - Iran Tensions

Geopolitical Tensions Favor Bitcoin Surge

Amid ongoing geopolitical tensions, macro strategist Mark Connors envisions a scenario where bitcoin emerges as a significant beneficiary if the conflict between the United States and Iran persists over an extended period. Connors, who previously served as the head of research at 3iQ and global head of portfolio and risk advisory at Credit Suisse, suggests that the financial burdens of war typically necessitate governments to resort to increased debt issuance. This action injects more dollars into the financial system, potentially leading to a devaluation of the currency and, in turn, benefits alternative assets like bitcoin.

"Liquidity drives bitcoin," Connors explained during an interview with CoinDesk. He anticipates that if the conflict lingers for months, it will result in heightened deficit spending as the U.S. finances military operations. "If the war persists, more spending and increased deficit spending are inevitable, creating a favorable environment for bitcoin," he emphasized.

Rising U.S. Debt and Currency Debasement

The U.S. is already witnessing a rapid escalation in its debt load. Connors noted that federal debt has grown at an approximate annual rate of 14% since mid-2025, projecting a potential year-over-year rise of 15% if current trends persist. "That's debasement," Connors articulated.

Interestingly, bitcoin seems to be responding to these dynamics. On Monday, the cryptocurrency rallied, with investors shifting funds out of equities and repositioning portfolios in anticipation of a prolonged conflict. Since the initial U.S. strike on Iran, bitcoin has gained 3.6%.

Inflation and Stagflation Considerations

A conflict-driven spike in oil prices could further complicate the economic landscape by driving inflation higher, Connors warned. However, he suggested that even in a stagflationary environment—where economic growth slows while prices increase—bitcoin may find support. In such a scenario, policymakers might prioritize financial stability and government financing over solely addressing inflation.

Connors highlighted that the Federal Reserve unofficially operates under an additional mandate beyond its traditional goals of stable prices and maximum employment: ensuring smooth financial market functioning, particularly in the Treasury market.

Interest Rates and Government Prioritization

Policymakers cannot allow disruptions like the 2019 repo market crisis or the regional bank failures seen in 2023 following aggressive rate hikes, Connors noted. "The Fed must ensure the Treasury market functions," he insisted.

This necessity may steer policymakers towards reducing interest rates over time, especially as the government pivots towards issuing more short-term Treasury bills instead of long-term bonds. Lower rates appear increasingly plausible if Kevin Walsh, known for his dovish stance, assumes the role of Fed chair in May following Senate confirmation.

With a larger portion of debt subject to short-term maturity, lowering short-term rates would directly decrease government interest costs. As rates decline while deficits persist, improved liquidity conditions are probable—a combination Connors predicts would be beneficial for bitcoin.

"When rates go lower, and debt continues to rise, that's the backdrop where bitcoin tends to excel," he concluded.

Coinasity's Take

Coinasity views Connors' analysis as a compelling argument for bitcoin's potential growth amid ongoing U.S.-Iran tensions. As geopolitical factors lead to increased deficit spending and potential currency debasement, bitcoin stands out as a viable alternative asset. The evolving economic landscape with shifting interest rates and financial priorities could indeed set a favorable stage for bitcoin to thrive.