I actually agree with part of what you're saying. I also think the players most immediately affected may be those who have been on a roster for 2-3 years without cracking the rotation.
Where I think we still disagree is whether that effect stops there.
If those players leave, the vast majority don't just disappear from college football. Many will transfer down and occupy roster spots elsewhere. Likewise, if a productive fifth-year player transfers instead of graduating, he's still occupying a roster spot that would have opened under the old rule.
So, I think it's both: the first people squeezed may be existing college players, but that pressure then works its way through the system. Eventually, some of those roster spots that would have gone to incoming high school recruits are instead occupied by fifth-year players.
As for the magnitude, I think we may just disagree. If you read my thoughts on this, I've not argued that the effect will be catastrophic or that it destroys HS recruiting. Never asserted "bloodbath", either, lol. My point is just that there will be an effect, and I don't think that effect ends after Year 1 or is limited to players already in college. If the average athlete plays even a little longer because of the extra year of eligibility, there will be fewer annual openings for new high school recruits than there otherwise would have been. That's how the arithmetic works.