Bitrabo Editorial
Hotbit, a cryptocurrency exchange, has announced its closure in a statement issued on May 22. The exchange, which supports trading of various cryptocurrencies such as Bitcoin, Ethereum, and USDT, will halt all of its exchange operations starting from May 22 at 4:00 AM UTC. Customers have until June 21 at 4:00 AM UTC to withdraw their assets.
The exchange cited multiple challenges, including the effects of the recent crypto winter and increasingly stringent regulations. In light of these developments, Hotbit made a bleak prediction about the future of crypto ramps, saying that they might not have a bright future.
Reasons Behind Hotbit’s Shutdown
As of May, Hotbit served over 5 million crypto traders who could trade various cryptocurrencies. However, due to the deterioration of operating conditions, the exchange has chosen to wind down its operations. The exchange also highlighted extra obstacles after the suspension of operations in August 2022.
The cryptocurrency market has faced torrid and volatile conditions since then. For instance, Hotbit pointed out the collapse of the FTX exchange in November 2022, the de-pegging of the USDC stablecoin in March 2023, and the bank crises, especially in the United States. These events have eroded investor confidence in centralized exchanges, causing most coin holders, including those of Bitcoin and Ethereum, to move their assets from top exchanges, with Hotbit not an exception.
In addition, Hotbit notes that operating a Centralized Exchange (CEX) is gradually becoming problematic due to the very sophisticated and linked structure of their operations. This creates additional challenges while complying with regulator demands or attempting to be more decentralized. Further, the platform has also addressed issues such as dangers associated with certain assets and frequent cyber assaults targeting their operations. Their business strategy of offering customers diverse investment opportunities was no longer viable from a “risk management standpoint.”
Exchanges Are Under Pressure
Hotbit’s closure comes less than a month after Bittrex, another cryptocurrency exchange, declared bankruptcy. Earlier, the United States Securities and Exchange Commission (SEC) had sued Bittrex for running an unregistered securities platform, thereby allowing its citizens to trade assets illegally. However, Bittrex has since denied these allegations.
The Commodity Futures Trading Commission (CFTC) and the SEC have also taken steps against Binance, the world’s largest cryptocurrency exchange by client count. For instance, in Q1 2023, the CFTC sued Binance, alleging that it had violated the country’s trading laws by operating a trading platform without proper registration. The CFTC also asserted that the exchange had not implemented sufficient anti-money laundering (AML) and know-your-customer (KYC) procedures.
Feature Image From Canva, Chart From TradingView