I am focused on an interesting market dynamic that not everyone may have noticed yet. If the US-Iran conflict continues for several months, there is a real potential for us to see a significant Bitcoin rally due to the macroeconomic conditions that will develop.

Mark Connors, a macro strategist with a background at Credit Suisse and now running his own Risk Dimensions firm, shared a compelling thesis about this. The core idea is simple but powerful: war spending requires massive government deficit funding, which means more USD supply in the financial system. As the money supply grows while the currency’s purchasing power declines, investors naturally migrate to alternative assets like Bitcoin.

The US federal debt has increased roughly 14% annually since mid-2025, and if this trajectory continues, we could see a potential 15% year-over-year growth. That is a significant depreciation of the existing currency in circulation. Connors specifically mentioned that liquidity is the real driver behind Bitcoin’s price action.

There’s also an interesting wrinkle here regarding Fed dynamics. The central bank is effectively operating under an additional mandate beyond traditional price stability and full employment—they need to maintain the proper functioning of financial markets, especially the Treasury market. They cannot allow repo market crises or banking sector failures to spiral out of control. This creates a structural bias toward lower interest rates over time, especially as the government shifts toward shorter-dated Treasury issuances.

If rates decline while deficits continue to expand, the resulting liquidity conditions are historically supportive of Bitcoin. Connors noted that even in a stagflationary scenario—where growth slows but prices rise—policymakers tend to prioritize financial stability and government funding over fighting inflation. The spike in oil prices from geopolitical tensions could push inflation higher, but under these loose monetary conditions, Bitcoin has a structural tailwind.

In fact, we already saw the initial market reaction on Monday. As equities liquidated and portfolios repositioned for prolonged conflict scenarios, Bitcoin rose 3.6% since the first US strike on Iran. BTC is currently trading around $71.74K and moved aggressively overnight.

On the XRP side, we saw a sharp pullback from $1.36 to $1.33 due to high-volume selling pressure rather than liquidity concerns. The price is currently around $1.33.

So if prolonged geopolitical tensions materialize and lead to sustained higher government spending, lower rates, and loose financial conditions, Connors’ thesis suggests this is a bullish setup for Bitcoin. The combination of expanding deficits, monetary accommodation, and currency depreciation has historically been the perfect backdrop for Bitcoin outperformance.