On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research, Todd Rosenbluth, discussed the Morgan Stanley Bitcoin Trust (MSBT) with Chuck Jaffe of Money Life. The pair discussed several topics related to the ETF, in order to give investors a deeper understanding of it.
Chuck Jaffe: One fund on point for today. The expert to talk about it. This is the ETF of the Week!
Welcome to the ETF of the Week, where we get the latest take from Todd Rosenbluth. He’s the head of research at VettaFi. At VettaFi.com, you’ll find all the tools you need to be a savvier, smarter ETF investor, and to get more details on the newsworthy, trending, and timely ETFs that we talk about here.
Todd Rosenbluth, it’s great to chat with you again!
Todd Rosenbluth: It’s great to be back, Chuck.
Chuck Jaffe: Your ETF of the Week is…
Todd Rosenbluth: The Morgan Stanley Bitcoin Trust. MSBT.
Chuck Jaffe: MSBT, the Morgan Stanley Bitcoin Trust. Well, let’s see. New, newsworthy, timely, and trending? I think we cover them all with this, because this is the newest entrant into Bitcoin funds. But it’s also Morgan Stanley, the big institutional player!
So does this represent something new and different in Bitcoins? Is this the official stamp of approval? Because it wasn’t even ten years ago that I was reading a Morgan Stanley report saying Bitcoin is worthless!
Todd Rosenbluth: Well, so there’s a lot to unpack here. So let’s do a little bit of history. For years, we didn’t have Bitcoin ETFs. Bitcoin continued to rise in value. It’s just over two years ago that we got the first spot Bitcoin ETFs; a wave of them were approved and some big-name firms were part of it. So, BlackRock with their iShares ETF, Fidelity. Grayscale led the charge for the conversion, and they’ve expanded their lineup.
Those are just a handful of those firms. Bitcoin continued to climb in value. The products gained traction. And then Bitcoin sold off. In fact, SOL is down for the year, but it’s bounced back. So, what’s coming is a few things. One, this is now the cheapest of those spot Bitcoin ETFs. It gives you the same exposure that you’d get from iShares or Fidelity or Grayscale.
So, fees do matter, and the lower fee does matter. It’s now after the sell-off and people are bouncing back. And you’re right, the Morgan Stanley name; Morgan Stanley’s name carries weight in a few different ways. Morgan Stanley runs a wealth management group. In fact, many a decade ago I worked there as a financial advisor. No ties any longer!
So, the financial advisors at Morgan Stanley, when the time is right, when they’re going to be looking at spot Bitcoin ETFs, this is logically a product that they might give consideration to. But it is also a strong name for other people, for advisors, for investors that work with other brokerage firms. So, yeah, this is new and newsworthy.
It’s not that different — in fact, it’s not different at all than other spot Bitcoin ETFs — other than it is cheaper. But it came out of the gate relatively strong with us talking about Bitcoin again.
Chuck Jaffe: Yeah, I mean, it came out of the gate picking up like $35 million, I want to say, on the first day, which maybe doesn’t sound like a lot, but which is huge in terms of ETFs on their first day, they don’t really do that. Like, that puts you in the top 1% of ETF new issues. And you mentioned the expense ratio, which is 14 basis points.
(IBIT ) the BlackRock iShares version is 25 basis points. Are you expecting a response? Like, will we have a price war on spot Bitcoin like we’ve had with, you know, S&P 500 ETFs?
Todd Rosenbluth: So I don’t think that iShares is going to be doing so. iShares has had a lot of success with IBIT in gathering assets; it has become the default for many people who are getting exposure to spot Bitcoin ETFs. And even though Bitcoin has been down this year, IBIT has been seeing strong, relatively strong inflows and, in fact, net inflows.
But there’s a product from Grayscale that has a 15-basis point fee. It’s one of the two products that Grayscale offers. It’s their mini-shares of it. So I do think that Grayscale was having some success. That product from Grayscale was popular among retail investors. We could see some competition because, again, the exposure is the same thing.
But it’s exciting, you’re right—to see a new entrant two years into it, to see a firm that believes that there’s still room to be able to compete within this space and carve out a niche. And Morgan Stanley did just that.
Chuck Jaffe: And you mentioned, you know, they’ve got what, like 16,000 or 17,000 financial advisors around the country. Not that you have to be one of their clients to get this ETF, but for all of the names that were there in Bitcoin before — the iShares, Fidelity, etc. — but also the Grayscales, there were a lot of smaller players, a couple of big names, but none of the major investment banks. Like, Morgan Stanley is a different class.
Do you expect we’ll now see all of Morgan Stanley’s brethren kind of come in and do this too, or yeah, the big dogs are here and nobody else wants to fight for the scraps now?
Todd Rosenbluth: So, I don’t think we’re going to see that. And so you didn’t name JP Morgan, but that’s the name that comes to mind. JP Morgan has a large and successful ETF presence focused on active management — and active management in particular for active equity and active fixed income. We have seen T. Rowe Price file to have an active cryptocurrency and Bitcoin-related product.
And so that is likely to be coming. We’ve seen some firms come to market with — and I think we’ve talked about it — products that are not from the large banks that are out there, but firms that have come to market with options-based strategies. We’ve, I think, talked about Neos and perhaps we’ve talked about Calamos Advisors.
Many of them have carved out — and investors, many of them have carved out — a slice of their portfolio to get exposure to Bitcoin. Now, Bitcoin hasn’t always performed well. No asset has. We saw gold sell off in March after being the go-to vehicle during times of market volatility. I do think that we’re going to see a growing supply because there is growing demand overall for cryptocurrency as an alternative within a portfolio.
Chuck Jaffe: And when it comes to crypto, given the fact that we have this many different ways to play it now, do you have a preference? Because it’s not quite gold and gold miners. I know some people want to make Bitcoin and crypto out to be digital gold, but it’s not so much like gold and gold miners because the alternative Bitcoin strategies tend to be more options-driven, etc.
It’s not necessarily, you know, “here’s the physical.” And obviously, in crypto, it’s not a physical. But here’s the spot versus here are the miners, per se. But is there a way you prefer to see it played? Is there one area that you particularly like?
Todd Rosenbluth: So, short answer: no. We have seen, and I think we’ve talked about, Bitcoin mining products. You and I have been doing this for quite a while, so we’ve talked about a lot of products. We talked about a CoinShares Bitcoin Mining ETF. There are now products that are available that offer altcoins, alternatives to Bitcoin and Ethereum.
There’s a growing number of those. I don’t have a strong enough view. I want to make sure that people are familiar with these products; they know enough about them [if they’re looking at them]. So there are probably people who are listening or watching this who saw that Morgan Stanley launched the product and wanted to understand: Is this different? Why is this? Why might I consider this? And maybe you’re going to get to that.
If you own a Bitcoin ETF, you should probably own a cheap one. I don’t think you should sell something to buy something, because there is going to be a tax implication for that.
But if you’ve been looking to get exposure to Bitcoin and you’ve been waiting on the sidelines and you don’t have any exposure through the ETF wrapper and you want to, MSBT is a good way of doing so. If you don’t own exposure to Bitcoin because you don’t think it’s a good investment, that’s okay. We’ve got another ETF of the Week for you next week.
Chuck Jaffe: This is not gonna — if you don’t believe in Bitcoin, and like I said, Morgan Stanley… there was a report famously in 2017 where their analysts were like, “Bitcoin is worthless.” And those analysts could still be proven right at some point. But if you don’t like Bitcoin, this is not a reason to buy it. But you did, because we have done this for a long time, kind of get to it, which is: yeah, because this is nine basis points cheaper.
You’re not suggesting that somebody sells off what they have because it’s nine basis points cheaper than the iShares version and more than some of the others. But if somebody is saying, “Yep, now is my time,” cheapest when we’re talking spot is kind of best, isn’t it always? Like, it’s money that you’re keeping in your pocket!
Todd Rosenbluth: Correct. So, all things equal, a lower expense ratio is a better thing depending upon how much you’re going to be trading this. And again, I don’t know who the audience is specifically. So, if your time horizon is relatively short, then the liquidity of the ETF — the trading volume — will matter. And so IBIT or (GBTC ), which is a Grayscale product — one of the two Grayscale products, not the one I was talking about earlier — that’s (BTC ). But GBTC trades more than you might be willing to pay a higher expense ratio for that liquidity.
But all things equal, with gold, with the S&P 500, with Bitcoin, when you’re getting the same exposure, you want to pay as little as possible. And so, why not — why not put more money to work for your new investments into MSBT if you’re considering Bitcoin?
Chuck Jaffe: And the liquidity on this one, well, it may very well get to where it’s lumped in with the others. It’s just too new to know, right?
Todd Rosenbluth: The liquidity of an ETF is often based on how liquid the underlying securities are also. So, if you wanted, even though this ETF is still relatively small, if you wanted to come inside, you would be executed in a reasonable manner because Bitcoin is a relatively liquid investment, as is gold or as is the S&P 500. We’re not talking about micro-caps or emerging market bonds.
Chuck Jaffe: It’s the MSBT, the Morgan Stanley Bitcoin ETF, the new ETF in the Bitcoin space and the ETF of the Week from Todd Rosenbluth at VettaFi. Todd, great stuff. I’ll see you next week.
Todd Rosenbluth: I’ll see you soon, Chuck.
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And I’m Chuck Jaffe. You can learn all about my hour-long weekday show by going to MoneyLifeShow.com, or by searching for it where you find your favorite podcasts.
Now, if you’re looking for more information on your favorite exchange-traded funds, check out VettaFi.com, where they’ve got a full suite of tools to help you get more information and make yourself a better investor. They’re on X @Vetta_Fi and Todd Rosenbluth, their head of research, my guest, he’s on X as well; he’s @ToddRosenbluth
The ETF of the Week is here for you every week, so make sure you don’t miss one by following along on your favorite podcast app. And we will be back next week with another ETF for you to consider. Until then, happy investing everybody!
Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.
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