BlackRock’s most successful exchange-traded fund (ETF) faces its clearest challenge yet as Morgan Stanley rolls out a cheaper rival with direct access to trillions in client capital.
Morgan Stanley’s ETF, which trades under MSBT and tracks the CoinDesk Bitcoin Benchmark 4 PM NY Settlement Rate, began trading Tuesday with an expense ratio of 0.14%, below iShares Bitcoin Trust’s (IBIT) 0.25%. The spread is narrow, but lands in a market where price is one of the few levers investors can pull.
Every spot bitcoin ETF has bitcoin and follows its price. That leaves cost, liquidity and access as the main differences. IBIT has led in scale and trading activity since its launch, becoming the most liquid instrument for both stocks and options linked to bitcoin ETFs with around $55 billion in assets under management.
This liquidity gives IBIT an advantage that may be difficult to replicate.
“The launch will affect things, but it will be interesting to see if it can actually siphon 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 near future.”
Yet the entry of Morgan Stanley changes the competitive balance.
The bank can leverage its vast wealth management network, where advisers can move client allocations with a single trade. In practice, this means that new demand can be directed towards MSBT rather than existing funds such as IBIT.
“Distribution is king in the ETF space, and Morgan Stanley has it in spades with its army of asset managers,” said Nate Geraci, president of the ETF Store. “Combined with MSBT being the lowest priced spot bitcoin ETF on the market, it’s a strong recipe for success.”
Geraci added that MSBT, which undercuts IBIT by 11 basis points, has a gap large enough to attract the attention of both investors and BlackRock.
IBIT’s position reflects how the market has developed. Early inflows favored large, trusted issuers with deep liquidity. Over time, as more trusted names have entered the market, fee sensitivity has grown.
Morgan Stanley’s launch may accelerate this shift, even as IBIT maintains its lead in trading volume.
The result is a more defined division in the market. IBIT offers depth and liquidity to active traders.
Newer entrants like MSBT compete on cost and distribution. Morgan Stanley’s wealth management arm oversees trillions in client assets and has one of the largest adviser networks in the industry, giving the bank a major advantage. As more capital moves through financial advisers rather than direct trading, this channel may gain increasing importance.
For now, IBIT remains the benchmark. But with fees falling and new entrants targeting its position, its grip on streams may face its first sustained test.
