Will the lightning network reduce BTC Liquidity due to "locking-up" funds in channels? How will people be able to buy and sell their BTC if all of it is locked inside Lightning channels?
Lightning Network payment channels are not really "locking up funds". Your funds are not locked, you can still send money to people and transact over the Lightning Network, even if you don't have a direct payment channel with those people. LN lets you route payments through others. So if you wanted to sell some Bitcoin and you have an open LN channel, then you can route your money to an exchange that supports LN and thereby deposit your coins. Then you can sell them. In your LN channel, you would have 0 Bitcoin, so you have actually sent your Bitcoin elsewhere.