Out of the loop

Not at all. They've been one of the largest instances on lemmy for over a year, and they federated widely during that time. The issue is that lemmy is still a relatively immature platform in terms of moderation features. The workload on their moderators to sustain federation and community safety with rudimentary moderation tools whilst the threadiverse population increases in size over 1000 fold is incredibly high.

So until moderation tools improve, their options are

1. Give up their safety focus. We can assume that's not going to happen
2. Find more admins, which is easier said than done, because at this point in time, one of the lacking moderation features is the ability to add instance moderators. Right now, the only instance elevated role is admin. You have to be able to trust the new admin with the keys to everything.
3. Defederate with instances that threaten their high value on community safety

It's the other way around: new people and instances are learning that federation also means that other servers don't want to federate with you, and that that's okay. This is different from the usual 'freeze peach' stuff, this is just communities saying 'we don't want to hear you'.

Especially when by all accounts they only had 4 admin/mods running all of their communities..