How did the Grinch know he hadn't stolen smiles or stopped Christmas?

The Grinch realized he hadn't stolen smiles or stopped Christmas when he witnessed the Whos in Whoville joyfully celebrating despite the absence of material gifts. Their unwavering spirit and happiness came from their love for each other and the essence of Christmas itself, not from the presents he had taken. This epiphany showed him that Christmas is about connection and joy, not just material possessions, leading to his transformation and newfound understanding of the holiday's true meaning.