I've seen worse extensions than Matt Chapman's. In this era of constantly seeing extensions that leave me shocked, this seems fine for both sides. They want to keep him and it would only take a single suitor to drive up the price.
To play hypotheticals, I could easily see a team with salary flexibility, a young core, and a hole at 3B signing him as a way to announce they wanted to compete again. Let's say the Lerners wanted to make a big splash this offseason, sort of a 2020's Jayson Werth, he would have made sense. I don't blame the Giants for locking him in early.