Amazon SDE2 rejected, down leveled to SDE1

I have 4 years of experience and interviewed for an SDE2 role at Amazon (AWS).

After the loop, they said they would offer me SDE1 but not SDE2. I messed up in one of the DSA rounds and couldn’t code the solution, although I manually explained the approach.

I’m currently at a job that pays comparatively less, and I’m reaching a point of stagnation there with the same repetitive work. Is SDE1 a setback? Or should I accept it since it’s a FAANG company?

Any insights or opinions? Considering the current job market, PIP and layoff culture at Amazon, what should I do?