Hotbit is set to halt all operations citing the increasingly cumbersome experience of running centralized exchanges. The Hotbit team admitted battling a litany of issues that made the centralized exchange lack long-term viability.
June 21 Deadline to Withdraw Funds
Hotbit revealed in a statement conveyed to its 5 million users via its official blog that it was taking a bow after five years and four months. The statement informed the Hotbit community that all operations would cease on May 22 at 04:00 UTC.
With the deadline already lapsed, the Hotbit crypto exchange operations have gone silent, with users directed to withdraw their funds by June 21. The statement indicates that it would cease to exist after 04:00 UTC.
The team expresses gratitude for the increased usage and large Hotbit community. Although a critic of the uncertainty caused by regulators, the Hotbit team expressed optimism in crypto innovation potential. The team admitted that several members would still fight to optimize the potential of crypto innovation.
Reasons for Sudden Exist
Hotbit detailed the reasons for terminating operations in a deteriorating environment despite serving over 5 million users. The crypto exchange founded in 2018 revealed that the operating climate worsened following its weeks of suspension in August 2022. The team regretted the suspension when the authorities opened investigations into a former employee.
Hotbit highlighted the wrong turn the crypto industry had taken as continually making centralized exchanges’ future uncertain. The team attributes the unviable climate of running centralized exchanges to the sudden implosion of FTX in early November 2022.
The collapse of FTX rekindled the healing wounds caused by Terra and Three Arrows Capital’s decline. The contagion effects of FTX collapse triggered increased affinity for regulatory oversight into crypto operators’ vulnerability to exploits and bad players. As such, the industry became a subject of regulation and called for increased decentralization.
The Hotbit team acknowledged that the cumbersome regulatory requirement threatens centralized exchanges (CEX). Besides being a subject of endless enforcement actions, the complex nature of CEX and interconnected businesses are challenging to guarantee compliance.
Expanded Portfolio Left Hotbit’s Business Vulnerable
The statement revealed that Hotbit’s operations offered various assets blended with value-added products. As such, the team indicates Hotbit was the pioneer in listing out emerging assets, including GRIN, KSM, and SHIB. Also, it unveiled staking services for ATOM as the pioneer to undertake DeFi mining via Compound.
Unknown to the team, Hotbit’s enterprising nature would haunt its business with numerous vulnerabilities. The team outlined the occurrence of repeated cyberattacks and exploits that made the investment model unsustainable.
The exploitation of various projects left the Hotbit business to incur huge losses. The team resolved to discover that the continued operation of the model in support of various assets’ range gradually becomes unsustainable to implement reliable risk management.
Centralized Exchanges Set for Bleak Future
The Hotbit team confessed that the experience of running the crypto exchange since its establishment in January 2018 reveals dwindling operations.
The team behind the exchange, located in Shanghai and Taipei, admitted that the geographical presence could not guarantee superior performance. The firm serves users across 170 countries, mainly outside China. The scale of operations could not resolve the susceptibility to risk and uncertainty.
Hotbit’s demise coincides with the announcement by Bittrex of filing bankruptcy. The centralized exchange decried that sustaining operations amidst the ambiguity in the US lacks economic viability.
The declining viability for centralized exchanges is forcing the exit from the US, with local firms such as Coinbase considering exit and pursuit of international market opportunities.
Nevertheless, the FTX collapse revealed the high-profile vulnerabilities facing centralized exchanges. Such incidents triggered increased skepticism over CEX’s reliability. In particular, the community questions the provision of crypto custody as calls for decentralization become louder.
Honoring the demands for decentralized platforms threatens to erode the economic viability of running centralized platforms, justifying Hobit’s imminent shutdown.
Editorial credit: Ira Lichi / Shutterstock.com
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