I think it was a mistake trying to recreate all niche communities to begin with. We should have just created larger communities, which over time naturally create niche offshoots.
I wouldn't say it was a mistake, but it was certainly overly ambitious. It's the fediverse, people are free to build communities how they see fit. But we also have to live with people using that freedom in suboptimal ways. The cream will eventually rise to the top.