Connect to LocalDB via SQLCMD in PowerShell
The casing of the instance name does not matter.

You need to try:

sqlcmd -S "(localdb)\MSSQLLocalDB" -d testdb01


The "localdb" part needs to be enclosed in parenthesis as that is a special syntax that points to a SQL Server Express LocalDB-specific API that allows for automatic instance start-up upon being referenced in a connection string. The whole instance name needs to be enclosed in double quotes. The command-line shown above works for me, at least outside of PowerShell.