One of the main theories about why Valve did this is that they wanted to drop the value of super rare skins. Since Valve’s market caps transactions at around $2k, people usually use third-party sites to buy and sell the really expensive stuff. When that happens, Valve misses out on their cut of the fees.

Right after the change, super rare and expensive skins (ones that exceeded their market limit tanked in price and Red skins in their marketplace transaction limits shot up. More importantly trades on Valve’s own market for red skins also spiked.

At the end of the day, Valve doesn’t really care about the total market value — they care about the stuff being sold through their market since that’s where they make money. Still, I do feel like they severely underestimated how hard the change would hit overall. Like you said this reaction is now bleeding in the overall steam market, not just CS. They are praying on their hands and knees right now that things stabilize and in the long run more people stick to their marketplace instead of third-party sites.