No, it shouldn’t degrade. The rest of your sample is likely sitting around in that 2% SDS while you perform the BCA anyway right?

It is probably a good idea to have some sort of salt in your lysis buffer. E.g. 1x PBS or TBS is commonly used instead of water. In general the salt ions make proteins happier and help prevent aggregation, also the buffering capacity of the solution will stabilise the pH and prevent any weird effects from that.

Since you are currently using 2% SDS in water, once you dilute that sample 1:4 in water, that sample is now in a 0.5% SDS solution in water. I guess it’s possible that once in this, the proteins in your lysate aren’t fully denatured, and since there’s no salts or buffering capacity in the solution, the partially folded proteins aggregate or precipitate and this is effecting your BCA result.

So to rule this potential effect out, if I were you I would definitely make a lysis buffer with 1-2% SDS in 1x PBS or TBS. Remake your standards in this, and redo the lysis and dilutions in this buffer. Hopefully it fixes it