I also am mystified by the discontinuation of the Hold Out. Flat ground, but a thin edge and a great slicer. I m carrying a Hold Out 3 as an outdoor work knife now. Surprisingly capable for such a small knife, in part due to its thin grind.
I can appreciate the increased slicing ability of the hollow ground Recon 1 when compared to the flat ground. But I still think the flat grind might be an improvement for a hard use knife.
But I could be convinced otherwise!!
I can still put a thin edge on the flat ground blades. With patience .
I think the size may have something to do with Holdout's demise. Holdout II and III happens to miss the sweet spot IMO. II is slightly too large at 9" overall(4" blade) and III is slightly too small at 6.8" overall(less than 3" blade). Many people are looking for Para 2/Manix/Griptilian/Sebenza/Lawman size knife that's around 8-8.25" overall with 3.5" blade. Many successful models as mentioned before happen to land on this goldilock zone and I believe a Holdout 2.5 with 3.5" blade and 8" overall size would hit the sweet spot very well.
I think there's a gap in CS's offering in this size range, the only real contender is the Lawman. Code 4/Ultimate Hunter/AD10/AD15 are all close, but they are slightly too large/heavy and miss the goldilock zone. Look at the latest SOG XR offering, specifically the tactical XR line. They just released 3 models - Pentagon XR, Vision XR and Tac XR. It's no coincident that all of them are around 8-8.4" long with around 3.5" blade, weighing 4-5oz. Despite the competitions in this space, many people wants to buy knife they are familiar with. If people are used to carrying Para 2 or Griptilian, they's a higher chance that they'll buy something with similar size & range.
To put it in analogy, imagine more people are looking for Glock 19, but Cold Steel only produces Glock 26(Holdout III) and Glock 34(Holdout II). You see this across the industry, most companies want to produce something that compete in the common size range. Auto industry for example - Ford has F150, Chevy has Silverado 1500, Dodge has Ram 1500. You don't go after Dodge RAM 1500 with Ford Ranger or F250.
The other reason is probably the marketing. The holdouts are being marketed as a dagger given its heritage. Had it been marketed as a utility/EDC knife like the Griptilian and the Para 2, it may have been received better and be treated as their viable alternatives.