Macro Setup: War Spending, Debt Expansion, and BTC Positioning
With U.S. military strikes on Iran now in the rearview mirror and crude oil briefly spiking to $120 before pulling back below $100, macro strategist Mark Connors — founder of Risk Dimensions and formerly global head of risk advisory at Credit Suisse — is making the case that a drawn-out conflict could become structurally bullish for bitcoin.
The core thesis is straightforward for anyone tracking macro-driven crypto flows: war is expensive, and the U.S. government will finance it through debt issuance. That expands dollar supply, pressures real yields, and historically benefits hard-capped, non-sovereign assets like BTC. Connors estimates federal debt has been compounding at roughly 14% annualized since mid-2025, with the pace potentially accelerating to 15% year-over-year if military spending ramps up.
'Liquidity drives bitcoin,' Connors told CoinDesk. 'If the war runs longer, that means more spending and more deficit spending. That's constructive for bitcoin.'
BTC Price Action: Early Signals Already Visible
Bitcoin has gained approximately 3.6% since the first confirmed U.S. strike on Iran, trading around $68,700–$69,000 as equity markets reversed early losses and crude oil retreated from session highs. The move suggests portfolio reallocation is already underway — capital rotating out of risk-off equities and into bitcoin as a macro hedge, a pattern that perp traders should treat as a signal rather than noise.
Open interest in BTC perpetuals has likely absorbed some of this directional flow. Traders should watch for elevated funding rates if spot-driven buying continues to outpace short positioning — a sustained positive funding environment would confirm that leveraged longs are building conviction rather than fading the move.
The Fed Constraint: A Hidden Tailwind
Treasury Market Stability Over Inflation Fighting
Connors argues the Federal Reserve operates under an informal third mandate: keeping the Treasury market functional. He points to the 2019 repo crisis and the 2023 regional banking stress as examples of the Fed being forced to prioritize financial plumbing over its stated inflation objectives. In a war-driven stagflationary environment — slower growth, sticky prices — the Fed would likely lean toward accommodation rather than tightening.
That dynamic becomes more pronounced if Kevin Walsh, Trump's reportedly dovish pick for Fed chair, is confirmed in May. A shift toward issuing shorter-duration Treasuries combined with rate cuts would directly reduce government borrowing costs while simultaneously injecting liquidity into the system — the exact macro backdrop that has historically correlated with BTC outperformance.
Stagflation Risk: Not Necessarily Bearish for BTC
The oil price spike complicates the picture. WTI briefly hit $120 before retreating to the $95 range — still elevated enough to feed into CPI prints over the coming months. Connors acknowledges the stagflation risk but argues it doesn't break the BTC thesis. In a stagflationary scenario, policymakers prioritize financial stability and government financing capacity, which ultimately means more liquidity, not less.
Trading Implications
- Funding rates to watch: Sustained spot-driven BTC buying could push perpetual funding rates positive. Traders holding long perps should monitor whether funding becomes a meaningful drag — if annualized rates exceed 20–30%, the risk/reward of holding leveraged longs deteriorates even in a bullish macro environment.
- Liquidation clusters: With BTC near $69,000, any geopolitical de-escalation or crude oil reversal could trigger a sharp pullback. Identify key liquidation zones — likely concentrated between $64,000 and $66,000 — where overleveraged longs could be flushed before any resumption of the macro-driven trend.
- Oil-BTC correlation: A sustained oil price above $100 increases inflation expectations and may delay Fed easing, temporarily capping BTC upside. Track WTI as a leading indicator for the macro narrative's durability.
- Altcoin exposure: In macro-driven BTC rallies, ETH and altcoin perps tend to underperform initially as capital concentrates in BTC. Traders should be cautious about chasing altcoin longs until BTC dominance stabilizes or reverses.
- Scenario planning: A quick conflict resolution removes the deficit-spending catalyst. Traders should have defined exit levels rather than treating this as a structural long with no downside scenario.