RFC 2307 (Experimental) suggests user passwords be hashed using a one-way (hopefully) cryptographically safe algorithm. They are often referred to as being "encrypted", but this is a misnomer (as they are not designed to be decrypted).
OpenLDAP supports RFC 2307 hashed passwords, including the {CRYPT}, {SSHA}, {SHA}, {SMD5}, {MD5}, and other schemes. Such passwords may be used as userPassword values and/or rootpw value.
Note: use of RFC 2307 Experimental passwords violates the Standard Track specification, RFC 2256, for user passwords and may lead to interoperability problems.
https://datatracker.ietf.org/doc/html/rfc2307
https://www.openldap.org/faq/data/cache/346.html