Geopolitical Risk Lifts Bitcoin 3.6%
Bitcoin has gained 3.6% since the first U.S. military strike on Iran, as investors reposition portfolios for a potentially prolonged conflict. According to macro strategist Mark Connors, geopolitical tensions could create a constructive backdrop for the cryptocurrency by forcing a significant increase in U.S. government spending and borrowing.
Connors, head of the advisory firm Risk Dimensions, states that financing a war typically requires issuing more debt, which expands the supply of U.S. dollars and debases the currency's value. This environment historically benefits non-dollar assets. "Liquidity drives bitcoin," Connors explained. "If the war runs longer, that means more spending and more deficit spending. That’s constructive for bitcoin."
Rising U.S. Debt Fuels Debasement Fears
The conflict arrives as U.S. government debt is already expanding at a rapid clip. Since mid-2025, federal debt has been rising at a 14% annualized pace. Connors argues this trend, which he calls "debasement," is a primary driver pushing investors toward scarce, alternative assets like bitcoin. Should this pace of borrowing continue, the national debt could increase by approximately 15% year-over-year.
While a surge in oil prices from the conflict could push inflation higher, Connors believes policymakers will prioritize financial stability. He contends that the Federal Reserve has an implicit mandate to maintain the smooth functioning of the Treasury market, limiting its ability to tighten policy aggressively as it did in 2023, which led to regional bank failures.
Fed Expected to Prioritize Liquidity
The Federal Reserve's obligation to ensure the Treasury market functions properly may force it toward lower interest rates, especially as the government increasingly relies on short-term bills to finance its debt. Lowering short-term rates would directly reduce the government's interest costs, making large deficits more manageable.
This policy constraint suggests an environment of falling rates and expanding deficits—a combination that would improve liquidity conditions in financial markets. Connors believes this specific macro-financial setup is highly favorable for Bitcoin's performance.
When rates go lower and debt keeps rising, that’s the backdrop where bitcoin tends to perform well.
— Mark Connors, Head of Risk Dimensions.
