What’s behind Ethereum’s movement

According to analysts at Bernstein, Ethereum has risen nearly 45% in the past two weeks, thanks to a combination of regulatory clarity, growing institutional demand, and favorable supply dynamics.

The GENIUS Act, signed by the US President, recognizes stablecoins as legal tender. This change shifts the focus back to Ethereum, the main blockchain supporting stablecoin transactions.

More than 60% of the total USDC supply is hosted on Ethereum. The platform also holds about 33% of the $25 billion real-asset tokenization market, largely concentrated in tokenized money market funds. The largest of these, BlackRock’s $2.8 billion BUIDL fund, is built on Ethereum.

Ethereum’s role as an investment asset is reinforced by the staking yield, which is currently around 2.9% in ETH.

All transactions with stablecoins and tokenized assets incur gas fees, payable in ETH. These transaction fees form the basis of validator rewards and staking returns.

As network activity increases, expectations for returns increase, which incentivizes more staking. The share of ETH staked has increased to nearly 30%, compared to 24% in January 2024.

ETH ETFs have also seen a sharp increase in inflows. Year-to-date, ETH ETF inflows total $4.8 billion, compared to $19 billion for Bitcoin ETFs.

However, momentum is changing. Last week alone, ETH ETFs attracted $2.2 billion, which is almost in line with Bitcoin’s $2.4 billion.

In a single trading day, ETH ETF inflows surpassed Bitcoin’s for the first time, with $602 million compared to $523 million.

BlackRock (NYSE:BLK) recently filed to amend its ETH ETF to include staking returns, potentially offering around 3% if approved.

Institutional accumulation is expanding beyond ETFs. Ethereum management firms, following the model popularized by MicroStrategy for Bitcoin, have acquired approximately 430,000 ETH so far in July, representing about 0.6% of the total ETH supply.

These companies intend to implement ETH assets in staking contracts and decentralized finance applications to generate returns.

Ethereum supply has remained stable since the introduction of EIP-1559 in 2021, which introduced a mechanism to burn a portion of transaction fees.

ETH supply has grown at a compound annual rate of just 0.8% over the past four years, adding deflationary pressure that supports price appreciation alongside rising demand.

Institutional interest, expanding ETF products, and a robust economic model based on transaction-based returns continue to solidify Ethereum’s role in the evolving digital asset landscape.