In a surprise move that took many market watchers by surprise, Wall Street giant Morgan Stanley has taken its cue from BlackRock and filed to create its own spot Bitcoin exchange traded funds (ETF).
Given that Morgan Stanley is the first major U.S. bank to take this step, there’s growing speculation that the world’s biggest banks are about to follow suit and embark on greater crypto uptake.
Following on the heels of BlackRock’s IBIT ETF early in 2024, Morgan Stanley is seeking to launch three - Bitcoin, Solana and Ethereum - cryptocurrency ETFs, with the two latter distributing staking rewards to shareholders.
Today’s market update by Morgan Stanley, follows its watershed decision as the first major U.S. wealth management business to allow its advisers to recommend bitcoin ETFs to select clients in 2024.
What’s clearly been instrumental in attracting Morgan Stanley to issue crypto ETFs is the realisation that iShares Bitcoin Trust ETF (IBIT) has become BlackRock’s most profitable product line.
Bryan Armour, ETF analyst at Morningstar suspects Morgan Stanley’s plans to lure clients who invest in Bitcoin into its [crypto] ETFs could give them a fast start despite being relative latecomers into this space.
However, Morgan Stanley’s entrée into the crypto ETF space may in hindsight not be so great, especially given that the Bitcoin’s price recovery in 2026 – which saw it fall after briefly nudging US$95,000 – appears somewhat fragile.
Nevertheless, despite IBIT being the fastest ETF in history to reach US$80 billion in assets under management (AUM), Jeff Park, CIO at ProCap BTC and an advisor at Bitwise Asset Management says there’s clearly enough untapped interest for Morgan Stanley to bet on a branded product having commercial viability.
What this signals to the market, adds Park is that Bitcoin is not only “socially” important, but also “financially” important as a product to offer customers.
“Consider the fact that for being “digital gold” there are virtually no branded gold ETFs in existence, yet for Bitcoin there is,” Park noted.
“This is because every asset manager knows that having a Bitcoin ETF communicates that they are forward thinking, young, and a little edgy that allows targeting the most challenging investor cohort that everyone wants to reach: UHNW Independent Investors.”
In addition to the ETF serving as a reputation and positioning tool - signalling credibility, innovation, and seriousness in the asset class – he also sees the Bitcoin ETF as a defensive move against platform disintermediation and fee leakage.
“By launching their own BTC ETF after IBIT already consolidated liquidity, Morgan Stanley is implicitly acknowledging a hard truth: DISTRIBUTION owns the customer, not product superiority … While this launch looks irrational through a pure AUM lens, also totally inevitable through a platform economics lens,” he said.
Whether it was spurred on by Morgan Stanley or not, Meanwhile, this week 15,000 Bank of America (BoA) wealth management advisers officially begin recommending clients may allocate up to 4% of their portfolios to cryptocurrency.
It’s understood the move by BoA will see its advisers cover four Bitcoin ETFs and assess their suitability for a 1-4% holding for its wealth management clients.
However, given the stop-start nature of fund inflow into U.S spot Bitcoin ETFs, Samer Hasn, senior market analyst at XS.com suggests that much of the current demand is being driven by tactical trades as opposed to sustained allocation.
“Until spot inflows become more consistent and less offset by sharp outflows, Bitcoin’s upside is likely to remain vulnerable to short-term reversals rather than evolving into a durable trend.”
Here in Australia, investors can choose from several products listed on the ASX, which provide either direct exposure to the price of Bitcoin or Ethereum, or exposure to companies within the crypto economy, these include:
• VanEck Bitcoin ETF (VBTC): This fund aims to provide returns that correspond generally to the price and yield performance of Bitcoin by investing in a U.S.-listed Bitcoin trust.
• DigitalX Bitcoin ETF (BTXX): This ETF provides direct exposure to spot Bitcoin, with the underlying assets held in secure cold storage by a global custodian.
• BetaShares Bitcoin ETF (QBTC): Offers a simple, regulated way to invest in Bitcoin's price potential by investing in a US-listed Bitcoin ETF run by fund manager Bitwise.
• Global X 21Shares Bitcoin ETF (EBTC): Australia's first spot Bitcoin ETF, designed to track the performance of the price of physical Bitcoin.
• BetaShares Ethereum ETF (QETH): Provides exposure to the price of Ethereum.
• Global X 21Shares Ethereum ETF (EETH): Similar to its Bitcoin counterpart, this ETF offers exposure to the price of physical Ethereum.
• BetaShares Crypto Innovators ETF (CRYP): Unlike the others, this fund invests in a portfolio of up to 50 companies involved in the crypto economy (e.g., crypto exchanges, mining firms) rather than holding digital currencies directly.
