Honestly I think it is. Much as the underlying architecture expects federation, each instance competes in a market of commoditized goods, which leads to coalescence. So if the fediverse thrives at all, it will be with one giant instance. Perhaps there'll always be a few other tiny instances for nerds (I use the word lovingly) who value that sort of thing, but normal people don't understand the concept of an "instance", and just want to show up at a .com to feast on data.
At any rate, even if you're right about federation, any social media service should seek to accommodate a wide diversity of ideas, opinions, and perspectives.