I think with a self-hosted mastodon instance, the main downside is poorer discovery across the fediverse as a whole.
When you scale up to the thousands of users something like mastodon.social has, it's not really an issue because other users have already established connections between instances by following or replying... but if your instance only has a single user, you only see and share posts with the instances you've directly interacted with, and it can be really isolating. You have to already know what external accounts you want to follow, because your instance is initially blind to them.
I feel like more instance connections leads to way larger amounts of data consumption too. I follow 120, and am followed by 12... my instance is currently using 24.1 GB for Media Storage.