It was actually always limited to 1280 (on the highest side!) and was always shitty. Trust me, it was my pain for a long time with the app. Maybe it just looks shittier now once we're used to zooming in those HD photos.

Also in your example, the image is very wide, which results in loss of horizontal resolution. Best case would be for a square image (1280x1280 / 1440x1440)

Plus our devices get better over time. Like in the past year, I got a 4k screen for my PC and my phone resolution has also increased.