Hi Reader, here's what you need to know for April 7th in 3:09 minutes.

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Today's big stories

Investment bank Credit Suisse revealed a $4.7 billion loss following the collapse of Archegos Capital Management
The world’s biggest bitcoin fund might offer a cheap way to buy into the cryptocurrency – Read Now
Air France-KLM is set to receive almost $5 billion in aid from the French government

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What’s Going On Here?

Every action has an equal and opposite reaction, and this one’s a doozy: investment bank Credit Suisse revealed a $4.7 billion loss following the blow-up of Archegos Capital Management.

What Does This Mean?

If the name “Archegos” rings a bell, it’s because the investment firm hit the headlines last week after dumping its holdings to cover losses from a few ill-advised bets. And since the company had been paying for them by borrowing heavily from the world’s banks, those same banks could now be facing $10 billion worth of losses – almost half of which has fallen on Credit Suisse’s shoulders.

That’s expected to push the firm to a $1 billion loss last quarter, and could help explain why it’s trying to preserve its cash by cutting its dividend and freezing share buybacks. And considering this is the second time in the last few months that the bank’s short-sighted lending has led to big losses, the firm announced it’s replacing the heads of its risk and investment banking departments too. Go figure.

Why Should I Care?

For markets: Watch for banks’ earnings later this month.
Credit Suisse won’t be the only bank with an Archegos-shaped stain on its balance sheet, but at least the sector’s had a strong quarter otherwise. Banks’ trading departments have benefited big from market volatility and record trading volumes, while their investment banking segments have done brisk business from a record number of mergers and acquisitions. Exactly how brisk will become clearer when they report earnings later this month…

The bigger picture: Interest rates take with one hand, give with the other.
Investors might’ve been spooked by rising long-term bond yields last quarter, but banks were much more upbeat about them. See, short-term bond yields stayed relatively flat, and since banks borrow money at short-term rates and lend money at long-term rates, a wider gap between the two means banks were able to pocket more profit (tweet this).

You might also like: How to pick and invest in the best of bank stocks.

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2. Analyst Take

The World’s Biggest Bitcoin Fund Is Broken

What’s Going On Here?

With a market capitalization of over $35 billion, the Grayscale Bitcoin Trust is the world’s biggest bitcoin investment fund.

And since it’s a good way for institutional investors to get their hands on the crypto, the fund’s shares have consistently traded at a premium relative to bitcoin’s value.

But not any more: the value of the fund sank to a record low relative to its bitcoin investments late last month, and it’s not managed to recover since.

That means Grayscale could be an interesting way for you to invest in bitcoin at a discount, but only if – and this is a big “if” – the fund can bounce back.

That rebound might not depend on bitcoin’s own movements either: buying into a fund meant to replicate an asset doesn’t necessarily mean one-to-one exposure to that asset’s price.

So that’s today’s Insight: if the Grayscale Bitcoin Trust really is a cheap way to buy into bitcoin, and what it’ll take for the fund to bounce back.

Read or listen to the Insight here

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