Hi Jacob,
In Stephen's technical introduction paper (https://www.wolframphysics.org/technical-introduction/typical-behaviors/rules-depending-on-a-single-binary-relation/) he specifically mentions this behavior:
Several distinct classes of behavior are visible. Beyond simple lines, loops, trees and radial
“bursts”, there are nested (“cactus-like”) graphs such as
obtained from the rule
{{x, y}} → {{z, z}, {x, z}, {y, z}}

I ran the rule to 10 steps and it does appear to flip after step 8 back and forth.
Anton