Galaxy Digital Holdings Ltd BRPHF CEO Mike Novogratz maintained expectations of strength in cryptocurrency markets towards the end of last year. Now that the crypto markets have pulled back, digital currency enthusiasts are diving into what went wrong.

Galaxy Digital aims to be the “smartest guys in the room,” Novogratz said Wednesday during a presentation at Piper Sandler’s “Global Exchange & Brokerage Conference.”

What there is to know: The tipping point for crypto markets appeared to be the collapse of TerraUSD USD/USD. This so-called stablecoin was supposed to remain at a constant price of $1, however, Terra lost its peg to the US dollar and fell sharply.

Stablecoins are cryptocurrencies designed to hold value against something in traditional financial markets, such as the US dollar.

Novogratz suggested the UST fell short when he said USD Coin USD/USD is representative of what a stablecoin should be during the conference.

USD Coin is another stablecoin pegged to the US dollar. It was released in 2018 through a partnership involving Circle and Coinbase Global Inc. PIECE OF MONEY.

See also: Coinbase holding its own on Bitcoin, Ethereum strength: Here’s why the stock needs to hold this pattern

Why is this important: Although the TerraUSD debacle seemed to cause a change in sentiment in the crypto markets, stablecoins are not the cause of the slowdown in crypto adoption.

Instead, a verification process called Know Your Customer, or KYC, is the main obstacle to crypto and decentralized finance initiatives in particular, according to Novogratz.

KYC is a way for financial institutions to screen individuals to determine whether or not they are who they say they are. In crypto markets, KYC could help prevent users from hiding illicit activity.

Novogratz maintains its bullish stance on crypto and said it expects KYC issues to be resolved within two years.

Related Link: KYC Explained: The Importance of Security in Cryptography

Photo: Petre Barlea from Pixabay.

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