Interesting - thanks for sharing that!
If you press and hold the power button at startup, that lets your Apple silicon Mac know that you're explicitly asking it to start up from macOS Recovery. In that case, you actually first arrive at Startup Options, where a selection of startup disks appears against a black screen. "Options" also appears, and if you select that, your Mac will continue to macOS Recovery.
I don't know why, but I'm guessing that there must be some small difference between selecting "Options" at Startup Options, versus a Mac falling back to macOS Recovery when startup fails or after an erase. I've seen a couple of other posts on this site mentioning the exact same issue. Hopefully your solution can help future posters as well!
In regards to Safe Mode, that only applies to macOS itself, and can be triggered on an Apple silicon Mac by doing the following:
- Shut down your Mac.
- Press and hold the power button (Touch ID) until Startup Options starts loading.
- Select "Macintosh HD", hold down the Shift key, and click "Continue in Safe Mode".