He was never one of the best full backs in the world. He was at times a very good player who lined up as a fullback.
The problem with Cancelo is h's not good enough defensively to be a fullback, not aware enough and too 1 footed to play in midfield and not good enough in the final third to be an attacking midfielder/winger.
Pep created a system where he could hide a lot of his weaknesses and show off his strengths, but even that came at the expense of 2 of our best attacking players - Foden and Grealish. Foden's best form was in the CL run with Zinchenko behind in 20/21 and Grealish has fluorished since Cancelo left. Why? Because they're in the positions he used to occupy, no longer forced wide onto the touchline, and they're simply much better players than him.