Or more probably it can be a combination of both (and possibly more) explanations. There is no way to know, all we can do is speculate.

But to think that this is just chaos theory is as naive as to think these behaviours are fully planned. That would mean that tiktok has no business strategy nor preferred outcomes to optimize towards.

If this is the case, then the system needs to be far less complex. The algorithm should absolutely be tuned in the direction of steering children toward content suitable for children and away from that which is not. They know this is not currently the case and doing nothing, so yes, they're purposely keeping it harmful.