BlackRock’s top-performing exchange-traded fund (ETF) faces its most obvious challenge yet, as Morgan Stanley launches a cheaper rival with direct access to trillions in client capital.
The Morgan Stanley ETF, traded under MSBT and tracking the CoinDesk Bitcoin Benchmark settlement rate as of 4 p.m. in New York, began trading Tuesday with an expense ratio of 0.14%, lower than iShares Bitcoin Trust’s (IBIT) 0.25%. The difference is narrow, but it occurs in a market where price is one of the few levers that investors can pull.
Every spot bitcoin ETF holds bitcoin and follows its price. This leaves cost, liquidity and access as the main points of difference. IBIT has dominated the business in terms of scale and trading since its launch, becoming the most liquid vehicle for Bitcoin ETF-related stocks and options with approximately $55 billion in assets under management.
This liquidity gives IBIT an advantage that can be difficult to replicate.
“The launch will impact things, but it will be interesting to see if it can actually siphon off assets from other funds,” said James Seyffart, ETF analyst at Bloomberg Intelligence. “IBIT is the most liquid ETF for trading and in the options market and it is unlikely that MSBT will ever be able to compete with it. At least not anytime soon.”
However, the entry of Morgan Stanley changes the competitive balance.
The bank can leverage its extensive wealth management network, where advisors can change client allocations in a single transaction. In practice, this means that new demand can be directed to MSBT rather than existing funds like IBIT.
“Distribution is king in the ETF space, and Morgan Stanley has it with its army of wealth managers,” said Nate Geraci, president of NovaDius Wealth Management. “Combined with the fact that MSBT is the cheapest spot Bitcoin ETF on the market, this is a solid recipe for success.”
Geraci added that MSBT, which reduces IBIT by 11 basis points, is a large enough gap to attract the attention of investors and BlackRock.
IBIT’s position reflects market developments. Early capital flows favored large, trusted issuers with significant liquidity. Over time, as more trusted names entered the market, sensitivity to fees increased.
The launch of Morgan Stanley could accelerate this shift, even if IBIT maintains its top spot in terms of trading volume.
The result is a more defined division of the market. IBIT offers depth and liquidity to active traders.
New entrants like MSBT compete on costs and distribution. Morgan Stanley’s wealth management arm oversees billions in client assets and has one of the largest advisor networks in the industry, giving the bank a significant advantage. As more capital flows through financial advisors rather than through direct transactions, this channel may have increasing clout.
For now, the IBIT remains the reference. But with fees falling and new entrants targeting its position, its grip on flows could face its first lasting test.
