But it seems that Signal failed grasp the importance of SMS, instead of fixing the ongoing issues, they let it rot before discontinuing it completely. Yes, SMS is bad for privacy, but they are not in a position to change that, they don't have the critical mass that Whatsapp has.
They thought they could take advantage of the boost they got with the Whatsapp/Facebook controversy and Elon Musk "use Signal" tweet to make people change their ways, probably not realizing that privacy is not that strong an argument for people outside of their bubble and that they have to offer "something else", and good SMS integration is "something else". And yes, having users that have "nothing to hide" is important for a privacy-focused app, because otherwise, the simple fact that someone is using that app can make him a target (see: EncroChat).