My hypothesis is: Humans are social and need social interaction to thrive. However we are not wired for the diversity of interacting with 7 Billion people and all the derivatives.

We thrive in small groups where there is high trust social networks and generally being around people with the same culture and belief system.

But humans don't, in any meaningful sense, interact with 7 billion people when they use social media any more than they interact with the entire population of their city whenever they go out. And most people living in any reasonably sized city - to use that as a real world analogue for social media - aren't only interacting with small, high trust social networks of the same culture and beliefs, and they manage just fine.

Your hypothesis (which seems more and more common) seems to me to be a "just so" story, but it doesn't correlate with what I've observed of real human behavior.