They are deeply threatened by it and are desperate to capitalize off xitters failing. Mark is probably enraged that he can’t just buy up the company and snuff it out.
I think it’s inevitable that if they aren’t going to use a blocklist (which they are probably too stupid to consider doing) they will likely end up in legal hot water for having the site become a war zone of alt-fedi instances harassing celebrities and random people off threads. I do not see how them federating will go well, at all.
For the most part, it should be. Will it? Time will tell. A lot of people are actively hostile to the idea of federation, even on lemmy. It’s very “complicated” for a lot of non-techy people to grapple with, but unfortunately as more and more centralized platforms implode its just going to have to become a new normal out of necessity regardless.