The overarching issue is that Etsy doesn't appear to recognize their users and what they're actually looking for. They've allowed for too much noise over the years.
I don't think Etsy "allowed noise". It's more that becoming a stick-on-folksy tat [1] bazaar was infinitely more profitable than trying to be a genuine source of lovingly crafted artisanal hand-mades.
Etsy seems to have enough users who are just fine with this.
I wonder if the real story is that other sources of tat have become more competitive and more widely known. Maybe there is no mass exodus of outraged craft buyers - Etsy's customers are simply shopping for the same things elsewhere, and paying less for them by cutting out the middlesite.
Etsy's profits didn't seem unduly harmed when they opened up their market, so the exodus theory seems unlikely.
[1] In case "tat" isn't a thing in USian English:
For example: https://www.etsy.com/shop/BonjourBizarre . I'm pretty sure you could not find any of those items on AliExpress.