BlackRock’s most successful exchange-traded fund (ETF) faces its clearest challenge yet, as Morgan Stanley launches a cheaper rival with direct access to trillions in client capital.
The Morgan Stanley ETF, which trades under MSBT and tracks CoinDesk’s Bitcoin benchmark settlement rate as of 4 p.m. New York, began trading Tuesday with an expense ratio of 0.14%, below the iShares Bitcoin Trust’s (IBIT) 0.25%. The difference is narrow, but it lands in a market where price is one of the few levers investors can use.
Every spot bitcoin ETF contains bitcoins and follow its price. That leaves cost, liquidity and access as the main points of difference. IBIT has led scale and trading activity since its launch, becoming the most liquid vehicle for both stocks and options linked to bitcoin ETFs with approximately $55 billion in assets under management.
That liquidity gives IBIT an advantage that can be difficult to replicate.
“The launch will affect things, but it will be interesting to see if it can actually divert 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 MSBT is unlikely to ever compete with it. At least not in the remotely near future.”
Still, the entry of Morgan Stanley changes the competitive balance.
The bank can leverage its vast wealth management network, where advisors can change client allocations with a single operation. In practice, that means new demand may be directed towards MSBT rather than existing funds like IBIT.
“Distribution is king in the ETF space, and Morgan Stanley has that in abundance with its army of wealth managers,” said Nate Geraci, president of ETF Store. “Combined with the fact that MSBT is the lowest-cost spot bitcoin ETF on the market, it’s a solid recipe for success.”
Geraci added that MSBT, which undercuts IBIT by 11 basis points, has a gap large enough to draw the attention of both investors and BlackRock.
IBIT’s position reflects how the market has evolved. The first capital inflows favored large, reliable and highly liquid issuers. Over time, as more trusted names entered the market, sensitivity to fees increased.
The launch of Morgan Stanley may accelerate that change, even if IBIT maintains its lead in trading volume.
The result is a more defined division in the market. IBIT offers depth and liquidity for active traders.
New entrants like MSBT compete on costs and distribution. Morgan Stanley’s wealth management division oversees trillions in client assets and has one of the largest advisor networks in the industry, giving the bank a major advantage. As more capital moves through financial advisors rather than direct transactions, that channel may have increasing weight.
For now, the IBIT remains the benchmark. But with rates falling and new entrants taking aim, its control of flows may face its first sustained test.
