Did you make the symlink while Steam was running? Did you actually click the "Exit Steam" menu item instead of just clicking the close button?
Did steam prompt you to either find your installation or reinstall?
Have you found reproducible steps?
No, I made the symlink when steam wasn't running. Used the "Exit Steam" button all the times. No reinstall prompt. But I can't reproduce it, no matter how I tried. Therefore I think that this usecase is very limited so it's probably safe to ignore this bug unless it resurfaces in somewhere else.
Feel free to reopen this if you can reproduce it.
Nothing extracted yet.
I have steam installed in ~/games/Steam and symlinked to ~/.local/share/Steam. After the update, steam decided to remove the symlink and made a fresh install which resulted in SteamGuard blocking the access from what it thought to be a new computer + traditional login issues. I removed the folder and remade the symlink and the update worked since then. Reporting just in case.