Icloud email

I've been using iCloud with my Hotmail account.

If your @hotmail account is your primair Apple ID, you can change your @hotmail.xxx to @icloud.com

See this Apple article: Change your Apple ID -> Change your Apple ID - Apple Support (SG)

Then see this Apple article: What to do after you change your Apple ID or password

What to do after you change your Apple ID or password - Apple Support

using my Hotmail account or create an iCloud Email

Don't create an @icloud.com but change it, see above.

After changing your primary Apple ID, your hotmail account still exists in accordance with Microsoft.

You can continue to use it if you wish, depending on what other things you use that hotmail account for.