Hotbit vs FTX. Why didn’t they win in a race?

We had experience using two crypto exchanges. We would like to start with Hotbit since recently we learned that the exchange is ending its presence in the market.It all began when Hotbit issued a notification to its users, recommending them to withdraw their remaining assets by June 21st. Hotbit, a cryptocurrency exchange based in Shanghai, announced its decision to cease all operations starting from May 22nd.

For not long ago, the platform’s team believes that centralized exchanges are becoming increasingly burdensome. They explain that the complex and interconnected nature of these enterprises makes it difficult to comply with regulations or achieve decentralization, which, in their opinion, is incompatible with long-term trends. One of the serious problems is the lack of investor protection and insurance coverage for crypto assets, especially in the case of decentralized exchanges (DEX). While some centralized organizations may offer some indirect investor protection, such as through stablecoins, even these instruments do not have guaranteed insurance coverage. Obtaining insurance for investors or clients is significantly less likely for DEX compared to centralized exchanges, and some centralized exchanges are either self-insured or have obtained insurance policies from external providers to compensate potential investors.

Revelent topic is that centralized investment platforms, whether in the crypto industry or beyond, are known for their convenience, security, and easy accessibility, which are key factors that most investors prioritize. As a result, most investors are unlikely to choose self-custody of their crypto assets in the long term. The recent surge in interest in hardware wallets following the FTX crash appears to be a short-lived trend, similar to previous instances where such incidents sparked temporary increases in interest.

And one of the significant problems is the lack of investor protection and insurance coverage for crypto assets, especially in the case of decentralized exchanges (DEX). While some centralized organizations may offer some indirect investor protection, for example, through stablecoins, even these instruments do not have guaranteed insurance coverage. Obtaining insurance for investors or clients is significantly less likely for DEX compared to centralized exchanges, and some centralized exchanges are either self-insured or have obtained insurance policies from external providers to compensate potential investors. The cryptocurrency exchange detailed how the industry was forced to either embrace regulation or move towards greater decentralization due to the successive crashes of major centralized institutions.

Uncommon way to claim “Can you guess which crypto exchange is being referred to?” That’s right, Hotbit. Hotbit also explained the deterioration of its operational conditions due to a series of crises, including the FTX crash and banking crises that led to incidents outside the USDC tethering. These events resulted in a continuous outflow of funds from users of centralized exchanges, including Hotbit.

Disadvantages play a big role in this news. This announcement came almost a year after the platform suspended trading, withdrawals, and deposits following the freezing of some of its assets by law enforcement agencies due to alleged criminal behavior by a former employee. I, too, experienced the frustration of having my assets stuck on the exchange. As we already know, Hotbit has repeatedly faced cyberattacks and exploitation of project vulnerabilities by malicious actors, resulting in significant losses. The team considers their current operational model, which supports a wide range of assets, to be unstable from a risk management perspective. Perhaps the abundance of “Shit coins” played a cruel joke on the platform.

See and believe that the consequences of the FTX crash indicate that centralized exchanges will continue to exist.

Cryptocurrencies and blockchain firstly initial vision was to disrupt existing financial institutions and challenge them.However, these institutions have instead become major investors and participants in the crypto space. While decentralization has been criticized by early cryptocurrency users, the reality is that trading and investing in cryptocurrencies have become highly centralized as the industry has gained widespread attention.

About doubts the future of centralized exchanges arose after the FTX crash and fraud allegations. The complete and dramatic failure of one of the most well-managed exchanges raises concerns about trust in centralized platforms. There is a risk that this collapse and its consequences may lead to the introduction of excessive regulatory measures.

Most of the regulation is inevitable in the cryptocurrency sector, and it is likely that the significance of centralized exchanges will decrease to some extent. However, despite the 68% increase in trading volume on decentralized exchanges (DEX) after the FTX crash, there are several reasons why centralized exchanges are likely to remain relevant. But as you may have understood, there may be several more significant crypto exchange crashes that will filter the market, leaving only strong players standing.

Many users, including myself, still lean towards centralized exchanges. Despite the recent crashes of some major centralized crypto organizations and the growing support for self-custody, most investors are unlikely to embrace decentralized exchanges. While DEXs have experienced a surge in trading volume, they still represent a relatively small portion of the overall crypto trading volume. Furthermore, the absence of self-custody as a standard practice in traditional investment options, where physical goods or stock certificates do not belong to investors, highlights the significant shift in mindset required for most investors to adopt self-custody.

From a regulatory standpoint, centralized organizations generally find it easier to comply with rules compared to decentralized protocols. Rules are typically developed and applied to institutions, which makes effective regulation of DEX challenging and likely leads to disappointment in various aspects.

Top 3 secure crypto exchanges for your use:

1. Coinbase

Beginner-friendly UI make it easy to make quick buys

One of the oldest and most reliable exchanges

Variety of products including exchange, staking, wallet

Advanced Trading options for experienced traders

2. WhiteBIT

Buy a huge variety of digital assets on one of Europe’s lowest fee exchanges

Take advantage of up to 20X leverage

Powerful API and lightning-fast software

Two-Factor Authentication (2FA)

3. Kraken

Supports many different funding options

Accepts users from across the globe including USA and Canada

Very high trading volume

Liquidity and trading functionality are also favorable for centralized exchanges. The big players that we mentioned above offer a wider range of trading opportunities and also want to say that they are usually preferred by investors with different experience. In addition, the liquidity and market opportunities provided by centralized exchanges, despite fears of collapse, facilitate trading and increase overall market liquidity.

Сonclusion

Thus, although the FTX crash dealt a significant blow to the crypto space and centralized exchanges, it does not mean the downfall of this industry. However, despite FTX being a loser, its creators have announced plans to relaunch the platform. Of course, the incident that significantly tarnished its reputation will also impact the future development of the entire business as a whole. Nevertheless, a glimmer of hope remains that it may resurrect this phoenix from the ashes and come back even stronger. Yes, when players like Hotbit exit the market, there is an unpleasant aftertaste. However, thanks to this, the market opens its doors to more stable, transparent, and efficient options in the market.