Political uncertainty in the Middle East has risen to an all-time high, with Saudi Arabia arresting the richest Arab in the world, Prince Alwaleed bin Talal. Could this result in a shift to Bitcoin, the digital safe haven, in the Middle East?

Saudi Arabia's crackdown

Saudi Arabia has initiated a sweeping crackdown, ostensibly against corruption, today. King Salman has ordered the arrest of senior princes and ousted many senior officials from ministerial roles. The list of people arrested includes Prince Alwaleed bin Talal, the richest Arab in the world.

Prince Alwaleed was in the news recently for his negative views on Bitcoin, saying that Bitcoin would face an Enron-like collapse. While the public reason given by King Salman for the arrests is his drive against corruption, many commentators believe that the King could be clearing the route for his son, Crown Prince Mohammed bin Salman, to take over as the King.

Qatar under siege

From early June 2017, Qatar's neighbors - Saudi Arabia, Egypt, Bahrain and UAE have imposed a blockade on the country, accusing the country of harboring Islamic militants and maintaining a relationship with Iran, Saudi Arabia's staunch enemy.

Qatar is a small country in the Middle East, with large natural gas reserves. According to the World Bank, it is the country with the highest per capita GDP based on purchasing power parity ($127.5K in 2016). It will also play host to the 2022 Fifa World Cup.

Many believe that the actual reason for Qatar's neighbors imposing a blockade is Qatar's support for Al Jazeera, a news organization which has aired views contrary to the established position in the Middle East. Given the absolute power enjoyed by governments in the Middle East, an independent news channel in the region has raised many hackles.

Bahrain on the verge of collapse

Bahrain is one of the smallest economies in the oil-rich Middle East, with its GDP five percent the size of that of Saudi Arabia. Its economy is oil dependent and the recent lull in oil prices has resulted in its economy getting strained.

The Central Bank of Bahrain has pegged its currency to the US dollar (0.376 Bahrain Dinar = 1 US dollar), but this has come under strain with dwindling foreign currency reserves. According to Bloomberg, Bahrain has approached Saudi Arabia for support to stave off a financial crisis and impending devaluation. Currency devaluation in Bahrain would spark a contagion effect in the Middle East, where most currencies are pegged to the US dollar.

Bitcoin rises when governments screw up

Misconduct by governments, either in the political or monetary space, results in people trying to find safe havens for their wealth. Traditionally this has been gold, but Bitcoin is fast developing as an alternate safe haven, with its decentralized and boundary-less nature.

The Middle East is strategically important, both because of its vast oil and natural gas reserves and the tremendous wealth of its citizens. If rich sheikhs in the Middle East think that parking a fraction of their wealth in Bitcoin makes sense given the uncertainty in the region, Bitcoin's price could scale new highs.