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I have had this happen on my AWU2 since update to watchOS 10.5! The watch is 235 days old (since OCT23) and the battery is at 100% health. I wear it 24/7 except for charging (about every two days due to the sleep sensors needing a battery charge of >30%). My question to you is how long can you leave optimized charging turned off without affecting the life of the battery in general or for your use case? TIA!
I do not know nor do I care what it is as my watch was bought in the same time frame as yours and it is 100% battery health. I just want my settings I had before an update to remain the same after an update. I bought this watch to use and I fully expect to get at least 6-7 years out of it and then I will go with a battery replacement and keep going.
 
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