Hong Kong-based cryptocurrency trading platform Hotbit has announced it will shut down its operations due to difficulty running its exchange.
Before this new announcement, Hotbit had more than 5 million users worldwide and was aiming to reach the level of top crypto exchanges like Coinbase and Binance. However, the crypto firm cited many issues for Hotbit shutting down, most of them similar to the FTX case. They mentioned risk management concerns, extreme modifications and changes within the crypto industry, and deteriorating operating conditions as the reason for getting Hotbit closed.
In a blog post, the company announced, "For five years and 4 months, the Hotbit team has been proud to participate in a wonderful crypto show with 5 million users. However, with great regret, we have decided to stop all CEX operations from May 22, UTC 04:00. We kindly ask all users to withdraw their remaining assets before June 21, UTC 04:00."
Why Did Hotbit Shut Down?
In their blog post, Hotbit listed three primary reasons they will close down their trading platform.
The company cited the deteriorating condition in the crypto industry as one of the reasons for shutting down. They mentioned that many crypto regulators have been trying to shut down their exchanges for many years, making it hard for them to operate successfully.
"Firstly, the deterioration of the operating conditions. After the Hotbit management team was forced to suspend operations for several weeks due to the investigation in August 2022 (https://hotbit.zendesk.com/hc/en-us/articles/8074249353495), the industry has experienced a series of crises, including the collapse of FTX, bank crises causing USDC off-peg incidents, resulting in continuous outflows of funds from CEX users, including Hotbit, and deteriorating cash flow," the company noted.
They also highlighted that the crypto industry is now changing in many ways. Hotbit said many crypto enthusiasts are moving away from the idea of centralized exchanges, making operations cumbersome." The Hotbit team believes that centralized exchanges (CEX) are becoming increasingly cumbersome, with highly complex and interconnected businesses that are difficult to comply with, whether for compliance or decentralization and are unlikely to meet long-term trends," the company noted.
The last reason the company gave is based on the numerous attacks on their exchange. They highlighted that their trading platform had become a massive target for cybercriminals who try to steal customers' funds. Hotbit said sometimes these hacks are successful, leaving them with no option but to replace customers' funds with their revenue.
"However, due to the industry's uncertainty, various opportunities also contain many risks. Hotbit has also suffered numerous problems, such as repeated cyber attacks and the exploitation of project defects by malicious users, resulting in significant losses. Therefore, the Hotbit team believes that the operation model of supporting a diverse range of assets is unsustainable from a risk management standpoint," Hotbit pointed out.
After many years of fighting hard to keep up their presence in the crypto industry, it appears inevitable that they'd be no Hotbit in the coming months. The former trading platform said that those who were former customers of the platform have, from now till June, to withdraw all their funds in the exchange.