I agree with the sentiment, when things get too popular every sub becomes more generic and filled with recycled or low effort content. But there's a happy medium. It would be nice if there were enough people that some more niche communities had activity.

It is far from getting to that point. That will happen when it becomes mainstream enough to attract normies. Lemmy could still use a lot of growth. I only get to consume content that happens to be available here, rather than being able to pick niche communities being active on the topics I would like.

I don't think growth is neccesarily the problem by itself, it's the velocity that is the problem. Reddit had a massive amount of steady growth for years and I think it mostly stayed good. Then the Obama AMA happened, and that, in my opinion is when reddit died. The number of new users outnumbered the old users and the old users could not enforce the previously established cultural norms (some bad, some good, but that is what made reddit reddit), and made the ratio of users to donations crash. large corporations and political organizations realizing reddit was a powerful way to influence people didn't help, but I think if the old guard of reddit had bullied the new users into following the unwritten rules reddit would not be nearly as bad a dumpster fire and the userbase would not be nearly so tolerant to admin BS.