As 9to5Mac notes, this is likely because of a new restriction that Apple is enforcing. As of April 1st, updates to Apple Watch apps must use the watchOS 2 SDK or later, while new Watch apps have to be built with the watchOS 4 SDK. Instagram’s app dates back to the days of WatchKit 1.0, when third-party software wasn’t able to run natively on the watch itself; it never got features like video support or the ability to work over an LTE connection.
In ending support for its Apple Watch app, Instagram is following other prominent companies including Twitter, Google, Amazon, and Slack. Many have found that good notification support is all people really need or want out of Watch functionality, and in some cases removing the app has even resulted in usability improvements. But since Instagram’s app focused on recreating the same scrolling feed of content from the full phone version, its death is a strong sign that the social network doesn’t consider the Apple Watch a useful standalone app platform.