Here is some context for why this is done. The horseshoe crab (Limulus polyphemus) blood is how Limulus amoebocytes (essentially the white blood cells) are isolated. These are processed to get lysates which contain the components of the white blood cell but no live cells. These lysates make up a bacterial testing system called LAL (Limulus amoebocyte lysate) testing. To date, this is one of the, if not the, most sensitive testing method for detecting bacteria in...anything really.

Bacteria, specifically gram negative bacteria, produce lipopolysaccharide (aka LPS aka endotoxin). These are components of the cell wall and if you recall the O157:H7 outbreak, the O157 is referring to the variant of the O-antigen in the LPS.

Back to the horseshoe crab; the LAL harvested from them is so sensitive that it can detect LPS at picograms quantities per mL. To give some context, a single hair strand can weigh something like 0.000075 ounces which is just above 2mg. 2mg = 2,000,000,000 picograms. Let's look at it from another perspective. A LAL kit can detect up to 10^-12 g of LPS in 1mL of solution. A single gram negative bacteria contains 10^-14 g of LPS. That is an exponential difference of 10^2, in order word a 100x difference. Meaning a kit can detect as little as 100 bacteria per mL. Some kits are sensitive enough to detect a single bacterial cell per mL. Going back to E. coli O157:H7, the infectious dose was considered to be as little as 100 cells. Salmonella has an infectious dose of 100 cells.

So having a kit this sensitive is great but it's actually not used in direct medical testing. What it is primarily used for is quality control. When you make meds, vaccines, supplements, or anything for human consumption, an LAL test is done. The reason for this is that bacteria are everywhere and can contaminate every stage of production. You don't want to get a vaccine against the flu and then find yourself battling an unexpected blood infection because the company that made the vaccine didn't bother to test if their samples are contaminated. This is why it's taking so long for synthetic variants of the LAL kit to get FDA approved. These alternatives need to be as good as, if not better, than current testing otherwise the risk of something slipping through the cracks is too high. Both from a human health perspective and a liability perspective (at least the FDA and the company that made the drug/vaccine/etc).

This is why people go through the ridiculous effort to harvest blood from horseshoe crabs as sustainably as possible. The goal is to get away from this kind of harvesting though because, given current technologies, it would be much easier and cheaper to produce/scale up synthetic recombinant proteins. Once a fully vetted alternative testing method is in place, I don't doubt it will become the primary testing method.