You primary concern is the semi-trusted nature of the PoS federation. I don't think this makes it a shitcoin. Lightning Sats are also derivatives, as well as being on chain sats. I agree that trust is the differentiator, but I would argue that we utilize trusted custodial third parties right now -- SN or Wos for example. Liquid is more decentralized, as most LN capital is concentrated in custodial nodes.

In addition, Liquid has a different risk model than LN. On-chain Liquid sats cannot be moved by the network, federation, etc. Supports Cold keys. I really am arguing it has a place. It is way too reductive to claim Liquid Bitcoin is a shitcoin, this is a non-nuanced position.

L-BTC does not increase the supply of bitcoin, only the velocity. 21M NGU stands. Blockstream is further experimenting with transaction encodings that promote privacy: https://blog.blockstream.com/bulletproofs-a-step-towards-fully-anonymous-transactions-with-multiple-asset-types/ I see having a test bed for economical experimentation with sats like Liquid is a good thing.

You could make the argument that Liquid promotes people minting shitcoins -- yes, it has built into the protocol the ability to issue Liquid Assets, which could be shitcoins.