Better Buy: iShares Bitcoin ETF vs. Morgan Stanley Bitcoin ETF
At the end of the second quarter, there were nearly 5,300 exchange-traded products, including exchange-traded funds (ETFs), listed in the U.S. In a densely populated universe like that, there’s bound to be what industry experts and insiders dub “copycat” or “me too” products.
That’s ETF speak for products with different branding that perform essentially the same function. Advisors and investors aren’t bothered by the existence of copycat ETFs. As just one example, the three largest ETFs each track the S&P 500, with the only differences between these funds being branding and annual expense ratios.
These two Bitcoin ETFs are similar, but investors need to look closely. Image source: Getty Images.
Although cryptocurrency ETFs are young compared to their traditional equity and fixed-income counterparts, there’s plenty of mimicking in that corner of the ETF market. Consider the case of spot Bitcoin ETFs, 11 of which debuted on Jan. 11, 2024. More joined the party after that, meaning investors now have at least a dozen ETFs that do basically the same thing to choose among.
That group includes the iShares Bitcoin Trust ETF (IBIT +0.64%) and the Morgan Stanley Bitcoin Trust ETF (MSBT +0.60%). Let’s attempt to settle this duel right now.
When familiarity matters…
One of the reasons the largest ETF issuers are, well, the largest is because investors find comfort in recognizable brands. That certainly extends to BlackRock’s iShares, which is locked in a tight battle with Vanguard for the top spot in ETF assets, and the trend of familiarity carrying weight applies to Bitcoin ETFs, where the $46.5 billion iShares fund is the largest product in the category.
Think about that. It debuted on the same day as 10 other comparable funds, and today it’s more than quadruple the size of its nearest rival. Confirming the weight of the iShares brand, this Bitcoin ETF is the category’s leader in assets under management, though not the least expensive fund. Five of its competitors have lower annual expense ratios than the 0.25% the iShares fund charges.
Asset heft, coupled with not being the cost leader in the Bitcoin ETF camp, suggests that part of the iShares’ success stems from significant adoption among institutional investors. It’s easy to see why the pros like this ETF. Its 30-day median bid/ask spread is just 0.03%, which equates to just a penny or two, meaning the fund can absorb large transactions without materially affecting the price.
Today’s Change
(0.64%) $0.23
Current Price
$36.39
Key Data Points
AUM
$47B
Expense Ratio
0.25%
Although this ETF is open to all investors, it may not be the best option for everyone.
When costs matter…
The Morgan Stanley Bitcoin Trust ETF launched on April 7, and despite what’s been a gloomy period in the cryptocurrency realm, the fund is off to a solid start, as highlighted by its $392.3 million in assets under management.
Obviously, Morgan Stanley is a widely recognized financial services brand in its own right, but the catalyst for this fund’s fast start, as well as the issue that may settle this fund vs. fund debate for many investors, is its low fee. The issuer was astute enough to realize it was a late entrant into this competitive corner of the ETF market and that it needed to differentiate its product from rivals.
That was accomplished by placing a yearly expense ratio of 0.14% on this fund, making it the cheapest offering among all spot Bitcoin ETFs. Time and again in the ETF industry, it’s been proven that low fees are effective tools for generating buzz and, more importantly, attracting assets.
Morgan Stanley Bitcoin Trust
Today’s Change
(0.60%) $0.11
Current Price
$18.42
Key Data Points
AUM
$392M
Expense Ratio
0.14%
That may be playing out with this Morgan Stanley ETF. What is clear is that, assuming neither of the ETFs mentioned here adjusts their expense ratios, the Morgan Stanley fund is the winning bet for investors looking to take the long view of the future of cryptocurrency.
