Preheat oven to 350 degrees F (175 degrees C). Grease a 9x13-inch baking pan.
Heat butter in a Dutch oven or large heavy pot over medium-high heat; cook and stir onion until tender, about 5 minutes. Remove Dutch oven from heat. Stir bread crumbs, oysters, oyster liquor, celery, salt, black pepper, thyme, and poultry seasoning into onion. Spoon mixture into the prepared baking pan; cover tightly with aluminum foil.
Bake in the preheated oven for 40 minutes; remove aluminum foil and continue baking until lightly browned, about 20 more minutes.
My method is to coarsely chop oysters: drain and reserve liquor then pulse several times in blender.
Dressing can be baked in the same oven as the turkey if making on Thanksgiving.