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I watched it happen to some of my favorite people that I worked with for 18 months before it happened to me.
1, this was not your decision. This was some random spreadsheet exercise by the higher ups that had nothing to do with you being better or them being worse. Random chance. Could have as easily been you as it was them.
2, I have no advice here. I never figured out how to have healthy boundaries. I was always afraid that if I had the boundaries, I would be next on the chopping block. Good luck.
3, you are definitely doing the right thing, looking for something new. Good luck there, too. The job market is hard and weird right now.