Liquid's Bitcoin Reserve Hole Shrinks by 300 BTC, Gap Now 250 BTC

Liquid's bitcoin reserves got a 300 BTC shot in the arm on Nov. 2, cutting the shortfall backing its L-BTC token down to roughly 250 BTC. The deposit landed in an address listed in the federation wallet and was confirmed in Bitcoin block 974299. JAN3 CEO Samson Mow flagged the move on X: 'Shortfall is now reduced to 250 BTC.'

The math is looking healthier. Mempool's Liquid explorer showed 3,717.94 BTC in reserves against 4,267.94 L-BTC in circulation as of about 3:55 p.m. ET, indexed through the block before the transfer. Stack the fresh 300 BTC on top and estimated reserves sit at 4,017.94 BTC, putting coverage at 94.14%, per The Defiant's calculation.

That's a real jump from where things stood on Oct. 28, when the gap was 550 BTC and coverage hovered around 87.07% after a 50 BTC top-up. The hole itself traces back to a Sept. 6 exploit of Elements, the software Liquid runs on. Blockstream's incident assessment said the hack minted about 4,000 unbacked L-BTC that was swapped into bitcoin through peg-outs, with 3,400 BTC returned the next day, Sept. 7.

L-BTC is meant to be backed one-for-one by bitcoin on the Liquid sidechain, and the federation isn't opening the taps until that promise holds again. Its staged recovery plan requires full backing before direct federation peg-outs — withdrawals from the bitcoin reserves — restart for authorized Peg-out Authorization Key holders.

There's a workaround for users in the meantime. An Oct. 27 federation update said one-for-one BTC and L-BTC swaps were live through AQUA, Bull Bitcoin and SideSwap. Normal federation peg-outs are still running under enhanced operational controls while security hardening continues and an independent security audit wraps up.

So the gap is closing, but slowly. Another 250 BTC and the ledger balances — until then, the federation's controlled restart stays on hold.