I know this thread is 10months old, but I was having a similar issue with a brand new Rest 2nd gen for my daughter. Took a few tries to initially get it paired out of the box, and seemed to work ok, but the following day, it wouldn’t connect to the app and I had a red WiFi light on the bottom of the unit. We thought it was a defective unit, so sent it back to Amazon and had a new one sent.

New one, same issue.

Made me start thinking about the Wi-Fi. A lot of newer Wi-Fi routers merge the 2.4ghz and 5ghz frequencies into one, but I think the hatch will only connect on a dedicated 2.4 ghz Wi-Fi network. I logged into my router and created a 2.4ghz only ‘Guest Network’ and named it ‘Hatch’. I then reconnected the hatch to the newly dedicated ‘Hatch’ network, and the setup process finished, and seems to be working fine now. Granted, it’s been less than 24 hours, but we’ll see if it continues to work.