For me the default is 2560 x 1440. If I change it to 1920x1080 things looks bigger and thus crisper. If I select 3840x2160 or 5K from "show all resolutions" then everything becomes small and blurry.
Note that these numbers are half the actual pixel count in each dimension because MacOS defaults to assuming the display is a 2x Retina Display.
So, if you choose the 1920x1080 option you get what I see using my actual 4K display. It also avoids the downsampling, because the stream itself is 4K and so is sharper.
I don't know why Apple set the default for 5K downsampled.