The 21-year-old has quickly become one of the Premier League's most sought-after lynchpins thanks to his dogged performances in the middle of the park for the Seagulls.
Brighton poached Caicedo from Independiente del Valle for a mere €5m (£4.3m) in January 2021 after Manchester United decided not to pursue a deal for the midfielder, who has since blossomed into an integral player for club and country.
Caicedo has scored two goals and provided three assists in 53 matches for Roberto De Zerbi's side, playing a key role in helping Brighton qualify for the 2023-24 Europa League.
However, the Seagulls were fighting an uphill battle to retain Caicedo's services for the upcoming campaign, as Chelsea fought tooth and nail to bring him to Stamford Bridge.
The Blues had seen their latest offer of £80m rejected by Brighton, and according to The Athletic, Liverpool have now swooped in and successfully hijacked Chelsea's attempts to sign Caicedo.
The report states that Brighton held an auction for the 21-year-old on Thursday evening, during which Chelsea raised their bid to £100m, whereas Liverpool offered a package of £110m.
The Reds' bid was unsurprisingly accepted, and Caicedo is now poised to undergo his medical on Friday, while personal terms are not expected to be an issue either.
Caicedo's £110m arrival at Anfield will make him the most expensive transfer ever between two British clubs, breaking the record only a few weeks on from Declan Rice's £105m move from West Ham United to Arsenal.
The South American will also surpass £75m man Virgil van Dijk as the most expensive signing in Liverpool's history, and he will follow Dominik Szoboszlai and former Seagulls teammate Alexis Mac Allister to Anfield for the 2023-24 season.
Jurgen Klopp's side have been searching for a new number six since Fabinho departed in a £40m deal to Al-Ittihad, while Jordan Henderson joined his former Reds midfield partner in Saudi Arabia with Al-Ettifaq.
Naby Keita, Leighton Clarkson, James Milner, Alex Oxlade-Chamberlain and Juventus loanee Arthur have also departed the club this summer, leaving Liverpool incredibly short of options in the centre of the park.
Stefan Bajcetic enjoyed a breakthrough campaign last term amid Fabinho's struggles, but the 18-year-old is yet to fully recover from the adductor injury he sustained back in March, which ruled him out for the rest of the 2022-23 season.
As a result, Caicedo is expected to slot straight into the defensive midfield role at Liverpool, who will begin their Premier League campaign away to Chelsea at Stamford Bridge on Sunday afternoon.
Caicedo memorably took to social media to try to engineer an exit from Brighton in January, when Arsenal failed with two bids for his signature, before penning a new contract at the Amex until 2027 with the option of a further year.