Morgan Stanley eyes $83B Bitcoin ETF market with ultra-cheap offering

Morgan Stanley is about to enter the Bitcoin ETF space with a fee arrangement that will significantly undercut nearly everyone else. According to an updated SEC filing, the bank will set its annual spot ETF fee at 14 basis points for its MSBT.

At that price level, this fee will be much lower than the annual spot ETF fee of 0.25% that BlackRock currently charges for its largest fund, the iShares Bitcoin Trust (IBIT). It even edges out Grayscale’s Bitcoin Mini Trust ETF, beating their 0.15% rate, currently the lowest in the market.

With this approach, market observers say the bank is trying to expand its large advisor base and add independent investors. Historically, cheaper products attract more assets, while high-fee funds grow worse off over time.

The New York Stock Exchange approved the bank’s application to list shares of its MSBT

The bank’s recent SEC filing comes on the heels of the New York Stock Exchange issuing a listing notice for MSBT, signaling the product may begin trading soon if cleared. After the listing announcement, Bloomberg senior analyst Eric Balchunas even projected that the ETF would start trading momentarily. If approved, Morgan Stanley will be the first direct bank issuer of spot BTC ETFs. 

Marty Party, a crypto commentator on X, shared that the combination of a low fee and the NYSE listing will redefine how Bitcoin ETFs compete for both price and investor attention. Other analysts also contended that the bank’s low-cost option could reshuffle the leaderboard for Bitcoin ETF inflows. Phong Le, CEO of Strategy, recently highlighted the product as a potential “Monster Bitcoin” catalyst, predicting that a 2% allocation from the bank’s clients would trigger demand of over $160 billion. That amount would easily surpass any current spot Bitcoin ETF.

The bank’s MSBT is designed along the same structural lines as current spot Bitcoin ETFs. Coinbase will serve as the prime broker and custodian for the coins, while BNY Mellon will handle the admin and transfer work. The Trust will also take a passive investment approach, tracking Bitcoin instead of actively trading it. Additionally, Morgan Stanley Investment Management noted it will not attempt to profit from price swings by trading highs and lows.

Oldenburg says they’ve been working to join crypto for years

Some analysts have been bashing banks for getting involved in crypto for the hype rather than for infrastructure development. Nonetheless, Amy Oldenburg, the head of digital asset strategy at Morgan Stanley, dismissed the notion that banks are just now jumping on the crypto bandwagon, noting they’ve actually been laying the groundwork for years.

She commented, “TradFi is getting FOMO and is now getting involved … it really isn’t accurate. We’ve been on a journey around the entire modernization of financial infrastructure for years.”

So far, the bank has built a huge $729 million position in Bitcoin ETFs, with nearly $667 million in BlackRock’s flagship fund.

Moreover, Oldenburg asserted they want to work on the tech to support digital versions of equities on their platform, starting in the second half of the year. With a platform already full of equities, she added, they have the perfect infrastructure to grow from. Internally, however, the shift means tearing down and rebuilding the core tech, forced to rethink how their basic “pipes and plumbing” actually work.

She also drew attention to the mismatch between how crypto-native companies and big banks conduct business. “There are so many other connectivity points that we need to plug in around it,” she explained that founders tend to underestimate just how intricate banking systems can be.

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