Android - How to revert to tabbed overview in Chrome?
You just need to uncheck the "Simplified view for open tabs" box under Settings → Accessibility in Chrome app.
Per beeshyams's comment the culprit appears to be the flag Accessibility Tab Switcher. However, I also did a fresh install to reproduce the issue with all flags untouched and it was ruled out with that.
Talking about Accessibility as he mentioned, I attempted Safe Mode and found that the issue was gone. Later, I tried to stop all accessibility services under Settings → Accessibility, and using trial and error, found AutoInput to be the culprit causing the overview to flatten out. Stopping its service immediately solved the problem.