I have observed this occurring in the latest version, then inventories of local players were swapped again, but without an update, only a restart of the console, because of MCPE-120635
EDIT: wrong bug number
This may need to be reopened. The bug reappeared. It appears at random, and involves flickering at all times during gameplay, and controllers randomly disconnecting and being unable to reconnect until the console is restarted. Usually if one controller disconnects, all controllers will disconnect. It also sometimes results in the console crashing, and only flickering has been observed in single player.
EDIT: Added more glitches that happen
It seems that the crosshair usually flickers when one player is using inventory/ other GUIs, and completely disappears if there are multiple players. It is still possible to place blocks; shoot bows, but aiming and trying to find out exactly where on the block you are pointing at is difficult. It seems this has not been resolved after 1.17, so I want to create activity to bring attention to this bug.
Same here, although other players can still use their crosshair, so this may be a different bug.
I think this can be closed. I factory reset the console and have not seen the bug again after that.
Update 2: The glitch has expanded. It happens much faster now. During the glitch, strange mechanical noises can be heard coming from the console. The glitch now continues outside of the game. When it is outside of the game, there is still flickering, and controllers are not able to find and pair to the console, even when connected via USB. Additionally, this occurs for most versions of Minecraft, such as when playing on an older map. Now that the glitch has expanded, it could effectively brick consoles, making it important to fix as soon as possible.
Update: The glitch has been less prominent, but occasionally the game will state that controllers have been disconnected, even when they are not. The only solution for this is to exit the word and then enter back in, which is very frustrating as it happens every five minutes or so.
I am experiencing a similar issue on the xbox series x. It doesn't crash immediately, but the more players that join, the more unstable it gets. The screen flickers, and eventually all of the controllers disconnect and cannot reconnect until the console is restarted. The console at one point crashed entirely and shut down. I factory reset the console a while ago, but the issue reappeared after a few months.