Yes, the key is that all circular orbits at the same altitude must cross, and if the orbits cross there is a potential collision. Satellites at the same altitude can only avoid collisions by controlling the position in the orbit.

Also, mean free path in a particle cloud depends on number density, cross sectional area and speed. The cross sectional area is small, but relative speed is also very high, which makes collisions more likely than one would think just based on their number density.