Liquid Network halts Bitcoin redemptions with reserves at about 86% coverage

The Liquid Network is running again, but nobody can cash out. Peg-outs, the process of turning Liquid Bitcoin (L-BTC) back into real Bitcoin, remain suspended while the sidechain's reserve sits about 603 BTC short, according to The Defiant.

Liquid says redemptions will not return until the reserve fully backs every L-BTC in circulation and its security reviews are complete.

The trouble began on September 6, 2026. A bug in Elements, the software that powers Liquid, allowed someone to create and redeem L-BTC without authorization.

Approximately 3,996 to 4,000 BTC left the federation reserve. That haul was valued at around $320 million at the time.

The federation reserve had held roughly 4,205 BTC before the exploit. At the worst point of the crisis, it was down to just 197 BTC.

White-hat actors returned roughly 3,400 BTC by September 7, about a day after the drain.

That recovery still left between 598 and 603 BTC unreturned. Around mid-September, the reserve was reportedly covering about 86% of outstanding L-BTC supply.

The signing keys held by federation members were not compromised. Neither was SideSwap's Peg-out Authorization Key.

Liquid restarted normal block production and user transactions on September 10, 2026. People can send and receive L-BTC inside the network again.