Tuesday, 7 November 2017

Saudi Arabia Nabs Billionaire Prince - Could Uncertainty Boost Bitcoin?

Political uncertainty in the Middle East has increased to an all-time high, with Saudi Arabia arresting the richest Arab on earth, Prince Alwaleed bin Talal. Could this create 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 men and women arrested includes Prince Alwaleed bin Talal, the richest Arab in the world.
Prince Alwaleed was in the headlines recently for his negative views on Bitcoin, saying that Bitcoin would face an Enron-like collapse. While the general public reason written by King Salman for the arrests is his drive against corruption, many commentators think that the King might be clearing the route for his son, Crown Prince Mohammed bin Salman, to take control whilst the King.

Qatar under siege

From early June 2017, Qatar's neighbors - Saudi Arabia, Egypt, Bahrain and UAE have imposed a blockade on the nation, accusing the nation of harboring Islamic militants and maintaining a connection with Iran, Saudi Arabia's staunch enemy.
Qatar is really a small country in the Middle East, with large natural gas reserves. Based on the World Bank, it's the nation with the highest per capita GDP centered on purchasing power parity ($127.5K in 2016). It may also play host to the 2022 Fifa World Cup.
Many think that the specific basis for Qatar's neighbors imposing a blockade is Qatar's support for Al Jazeera, a news organization which includes aired views despite the established position in the Middle East. Given the absolute power enjoyed by governments in the Middle East, an unbiased news channel in the region has raised many hackles.

Bahrain on the verge of collapse

Bahrain is among the smallest economies in the oil-rich Middle East, using its GDP five percent how big that of Saudi Arabia. Its economy is oil dependent and the recent lull in oil prices has triggered 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 it's come under strain with dwindling foreign currency reserves. In accordance with Bloomberg, Bahrain has approached Saudi Arabia for support to stave off an economic 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 searching for safe havens for his or her wealth. Traditionally it's been gold, but Bitcoin is fast developing being an alternate safe haven, using its decentralized and boundary-less nature.
The Middle East is strategically important, both due to its vast oil and natural gas reserves and the tremendous wealth of its citizens. If rich sheikhs in the Middle East genuinely believe that parking a portion of these wealth in Bitcoin is sensible given the uncertainty in the region, Bitcoin's price could scale new highs.

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