My Battery Health Quickly Drops

It's an estimate and also one subject to rounding errors since it's only displayed in integer percentage. I've even heard of the Battery Health reporting a number going up.

That being said, Apple makes no claims about how fast this number should decline. The only standard they have is for 500 cycles to 80%. If it drops to below 80% before the warranty or AppleCare period they will replace the battery under warranty. I wouldn't be overly concerned just because it's at 98%. There can be variation in the new capacity of a battery, and yours might be lower. I haven't seen it in an iPhone, but I've seen it in other Apple batteries.

All of the live readings tend to go up and down. My iPhone 7 is reading anywhere from 99.1% down to 96% in coconutBattery with about 170 cycles. Battery Health reports 99%. I’ve done nothing special.

I wouldn’t worry too much. There’s not much you can do. Apple wouldn’t consider it defective and won’t typically replace a battery for wear unless it’s under 80% battery health.

iPhone Battery and Performance - Apple Support