While last year many large companies from the crypto sector went under like dominoes in succession, this year some parties have also been unable to escape the feared downfall. In the past month, for example, you could read in the crypto news that the Belgian crypto exchange Bit4You and the American exchange Bittrex had filed for bankruptcy. The next centralized crypto exchange to close is Hotbit, one of the most popular exchanges in Asia.
Reason behind closing crypto exchange
In a May 22 announcement on Twitter, the company said it will end all operations after 5 years and 4 months. The total of 5 million users will have until June 21 to remove their crypto from the platform.
It’s time to take a bow 🙇
For 5 years and 4 months, the Hotbit team has been proud to participate in a wonderful crypto show with 5 million users. However, it is with great regret that we have made the decision to stop all CEX operations from May 22, UTC 04:00. We kindly ask all…
— Hotbit News (@Hotbit_news) May 22, 2023
The exchange said business conditions had worsened since a former member of the team was dismissed from an investigation in August 2022. At the time, the company suspended trading deposits and withdrawals after law enforcement froze some of its assets during the criminal investigation.
In addition, Hotbit also cited several incidents within the crypto landscape as contributors to its eventual downfall. To be specific, it mentioned the collapse of FTX and the banking crisis that caused the dough of the popular stablecoin USD Coin (USDC). Hotbit said both resulted in a continuous outflow of funds from centralized exchanges.
The demise of companies within the crypto world therefore works in a sense like a chain reaction. The bankruptcy of a major player like FTX has sparked many aftershocks across the industry as a whole.
The exchange also blamed repeated cyber-attacks and the exploitation of “project defenses by malicious users” as reasons for its demise.
Are decentralized exchanges the solution?
The Hotbit team believes that centralized exchanges are becoming “increasingly cumbersome” and are “likely not to match long-term trends.” According to the trading platform, the crypto industry will increasingly focus on decentralized business models in response to the tighter regulatory oversight of centralized companies following the collapse of FTX.
Decentralized alternatives should, in theory, be able to avoid the risk of a single point of failure.