Ethereum has rallied nearly 45% over the past two weeks, with analysts at Bernstein citing a combination of regulatory clarity, increased institutional demand and favorable supply dynamics as the driver of the rally.

The GENIUS Act, signed into law by the US President, has recognized stablecoins as legal digital cash. This shift has brought back attention to Ethereum, the main blockchain supporting stablecoin transactions.

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

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

All stablecoin and tokenized asset transactions incur gas fees that need to be paid in ETH. These transaction fees form the basis of validator rewards and staking returns.

As network activity grows, earnings expectations rise, incentivizing more staking. The ETH staking ratio has increased to nearly 30%, up from 24% in January 2024.

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

However, momentum is shifting. Last week alone, ETH ETFs attracted $2.2 billion, almost matching Bitcoin’s $2.4 billion.

For the first time, ETH ETF inflows surpassed Bitcoin in a single trading day, at $602 million versus $523 million, respectively.

BlackRock (NYSE: BLK ) recently applied to amend its ETHA ETF to include staking income, which if approved could provide a yield of about 3%.

Institutional accumulation has gone beyond ETFs. Ethereum Treasury, following the model popularized by MicroStrategy for Bitcoin, has acquired about 430,000 ETH in July, accounting for about 0.6% of the total ETH supply.

These companies intend to deploy ETH holdings into staking contracts and decentralized finance applications to generate returns.

Ethereum’s supply has remained stable since the implementation of EIP-1559 in 2021, which introduced a mechanism for burning a portion of transaction fees.

Over the past four years, ETH supply has grown at a compound annual growth rate of just 0.8%, adding to deflationary pressures and supporting price appreciation as demand rises.

Institutional interest, expanded ETF offerings, and a stablecoin economic model built on transaction-driven returns continue to solidify Ethereum’s role in the evolving digital asset space.