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Yes. This is one of the risks picking a small instance. On the other hand, all instances were small once. Most still are. And you should help them grow instead of sitting on the largest one.
Instances that grow are much less likely to shut down. I only know a few instances that have shut down actually, so I don't think it's a large risk. We wouldn't have 1300 instances if they would shut down often.
I know it's only been a few months since Lemmy got a lot of new users. So we will see how it plays out. But for a healthy Lemmy ecosystem, there should be hundreds of active instances with lots of people.