Why the TradFi takeover of crypto might not be the death blow analysts expect

Morgan Stanley’s launch of crypto trading on its E*Trade platform at a 50 basis-point fee is intensifying a fee war that could materially compress spot-trading margins for U.S. crypto exchanges. Traditional finance entrants undercut rivals (Schwab cited at 75 bps) and echo prior ETF fee compression, suggesting trading costs for retail users will fall. Market participants warn U.S. exchanges like Coinbase could see revenue and margin pressure, pushing them to diversify into derivatives, DeFi and international markets. Crypto-native executives counter that the industry has already moved beyond fee-only models—staking, structured products and institutional services—so TradFi’s entry is not necessarily existential. Overall, the development is likely bullish for mainstream adoption and retail trading activity but mixed for crypto exchanges’ profitability and business mix.