New Bitcoin ETF Joins the Fee War, But IBIT's Crown Remains Unshaken

Morgan Stanley Bitcoin Trust (MSBT) launched on April 8 with a 0.14% expense ratio, becoming the cheapest US spot Bitcoin ETF and undercutting BlackRock's iShares Bitcoin Trust (IBIT) by 11 basis points. Senior ETF analyst Eric Balchunas, however, does not expect BlackRock to respond with a fee reduction.

MSBT pulled in approximately $30.6 million in net inflows on its first day and processed more than 1.6 million shares. Balchunas placed the debut among the top 1% of all ETF launches and projected $5 billion in AUM for MSBT within its first year.

Still, he made clear that IBIT's position remains secure for now. IBIT holds roughly $55 billion in assets, making it the most liquid spot BTC ETF by a wide margin.

"Prob won't see any cut from $IBIT. When you are King of the Hill with tons of liquidity, you have pricing power," Balchunas noted.

That liquidity moat gives IBIT tighter trading spreads and deeper options market activity—factors institutional traders weigh heavily when choosing a fund. Fellow Bloomberg analyst James Seyffart echoed that view, noting it's unlikely MSBT will compete with IBIT on liquidity anytime soon.

Where the Pressure Falls

Balchunas warned that MSBT's aggressive pricing could still trigger fee cuts elsewhere. Smaller issuers with less scale may be forced to lower their expense ratios to retain market share. Since all spot BTC ETFs hold the same underlying asset, fees become one of the few differentiators.

MSBT now sits one basis point below Grayscale's Bitcoin Mini Trust at 0.15% and well below Fidelity's Wise Origin Bitcoin Fund at 0.25%.

Morgan Stanley also brings a structural advantage most competitors lack. The bank's wealth management arm employs roughly 16,000 financial advisors overseeing $9.3 trillion in client assets. Those advisors can now recommend an in-house product rather than directing clients to third-party funds.

Two Scenarios That Could Change BlackRock's Mind

Balchunas identified only two scenarios that could force BlackRock to reconsider its pricing. The first would be sustained outflows from IBIT toward cheaper rivals. The second would be an entry from Vanguard at approximately 0.10%, though he assigned that outcome a 0.01% probability.

The US spot BTC ETF market has grown past $100 billion in cumulative assets since launching in January 202