TLDR:
Hyperliquid matches orders block by block and prioritizes cancellations within each block, says Xu.
Xu links Hyperliquid’s order book depth to its market maker friendly design versus many exchanges.
Xu says the design offers another approach for long-tail assets that have limited liquidity.
Xu blames the October 10 liquidations partly on USDe being treated like a stablecoin as collateral.
Star Xu says the Hyperliquid matching engine is more market maker friendly than the systems used by centralized exchanges. The OKX founder shared the view on the New Era Finance Podcast with host Michael.
He said Hyperliquid matches orders block by block and gives cancellations priority within each block. Market makers can therefore cancel orders ahead of takers. Xu also covered MiCA, customer protection, and the October 10 market turmoil during the discussion.
How the Hyperliquid Matching Engine Works
Xu said the Hyperliquid matching engine differs fundamentally from centralized order book exchanges in its technical design. Centralized exchanges process orders individually. Hyperliquid, by contrast, matches orders in blocks.
Within each block, the system prioritizes cancellations. Under the Hyperliquid matching engine, market makers can therefore cancel orders ahead of takers. Xu called this design market maker friendly.
Xu believes this design explains why Hyperliquid’s order book depth appears better than that of many centralized exchanges. He added that the Hyperliquid matching engine offers another approach for long-tail assets with limited liquidity.
Xu made the comments while discussing crypto’s evolution. He said repeated crises, from early Bitcoin attacks and Mt. Gox to FTX, tested the sector.
Each episode also prompted improvements, in his view. He sees blockchain as a base for more efficient finance through self-custody, stablecoins, and tokenized assets.
Trust, Risk Controls, and the October 10 Turmoil
Xu described MiCA as an important step toward consistent crypto regulation across Europe. He noted the compliance challenges OKX faced while entering the market.
He said international growth depends on earning customer and regulator trust through transparent operations and stronger governance.
He pointed to board oversight, compliance and risk functions, monthly proof-of-reserves reports, and external auditing. OKX also plans to pursue a public listing. Xu said these steps increase accountability.
Xu said safeguarding customer funds matters more than aggressive growth. Exchanges, he added, should follow financial rules and earn money from technology and services.
He recommends self-custody for users who can manage keys securely, though wallets can be vulnerable. He also warns against unusually high yields and demands to “just trust” an exchange.
Xu attributed the cascading October 10 liquidations partly to USDe being treated like a stablecoin and accepted as derivatives collateral. He described USDe as a higher-risk, hedge-fund-like product.
Leveraged borrowing against it could magnify returns but also amplify losses when prices moved. Xu argued that tighter risk controls and regulated derivatives venues could help prevent such episodes.
Looking ahead, Xu expects crypto to expand beyond trading into everyday financial services. These include wallets for holding money, blockchain payments, and tokenized equities.
He also expects on-chain asset-management tools that let users keep control of their funds. He is optimistic these technologies could become widely used financial infrastructure.
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