TL;DR: I speculate that it's because they removed the feature which marked all notifications as Read on Refresh, likely because it wasn't what the user expected to happen. Then they intentionally didn't replace the Mark All As Read feature as it didn't benefit enough users on mobole.
Facebook used to mark all notifications as read whenever you pulled down the pane to refresh, but for some this will have been undesirable. Presumably Facebook pulled the feature without replacing the Mark All As Read functionality.
To answer your question regarding it affecting the user experience adversely: For these people, Yes it does.
However, that's the only support ticket I could find, so my best guess is that they performed research and found that the functionality wasn't used all that much on mobile.
Is it due to real estate? I don't think so. The iPad version has plenty of space for a Mark All As Read button, yet it is still not included. But it might be classified as what Alan Cooper calls excise. By including it you increase the cognitive work users have to perform, but only benefit very few of them.
And I think there's a reason it's unlikely to be included in the future:
Notifications are now separated into two segments: New and Earlier. From an information architecture perspective, would Mark All As Read apply to only the New notifications, or all of them?
But again, as Andrew Martin mentions in his comment to the question, all we can do is speculate. Unless anyone has a loose-lipped contact at Facebook, of course :)