I don't think it's all of the sudden. Imo his biggest quality has been that he was extremely mature at a very young age but I don't think there's necessarily a world class talent beneath that. So naturally (as becoming mature is an automatic part of most player's development) that head start matters less and less and he begins to look more ordinary.
Put a talented attacker in Dortmund's team and he's bound to look good and pick up a couple of goals/assists here and there. Add to the mix that he's from the US who are desperate for a decent footballer and let him play a lot of games against 3rd rate opposition and voila you have some off the charts hype going.
And FYI: both Sancho and Pulisic have played on either attacking side. It's not like he's being benched just because of Sancho. He's being benched because Favre also prefers Bruun-Larsen and Guerreiro.
I heavily disagree with this statement as the mental part of the game can easily hinder a talent from developing towards a top class player no matter how much raw talent he has.
And Christian Pulisic has plenty. From the technical and physical stand point Pulisic is in no way less talented than Marco Reus was, who reached (and still operates on) undisputed world class level. His first meters with the ball on his foot are exceptional, his passing ability (strong control on both weight and direction) is very clean and his shooting technique is actually pretty damn strong (as attested by multiple coaches and teammates including the mentioned Reus).
The problem is not that others caught up to him, but that Pulisic does not covert his talent into performances well enough anymore. The number of technical mistakes (especially in terms of first touch) and wrong decisions rose steadily. He did not stagnate in his development but actually regressed. He was a better player at 18 than he is at 20 and as I believe that a football player does not suddenly forget how to play the game, I think the problem is of mental nature.
He suffered a major mental setback when the US failed to qualify for the WC 2018 and it changed his attitude on the pitch. Instead of beating one opposing player and then passing the ball, he started to take on three and lost the ball in the process. His good decision making as team player vanished and what remained was a fairly egoistical way to play the game.
He is visibly not commited enough to the club and team anymore as he decided to need a change of environment to develope. I think his most likely destination (Chelsea) is a horrible choice as the pressure to perform (from what he seems to suffer under) won´t lessen in the EPL and the Blues are known to have very little patience with talents (the stark opposite to us), but maybe he will prove me wrong. I highly doubt he will fail because of a lack of talent, though.