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For a couple of layers of curly braces "{}", when I move mouse to the line number, there are multiple down arrows that indicate the code block can be collapsed.

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For a large number of layers of curly braces "{}", when I move mouse to the line number, there is only one arrow that indicates the code block can be collapsed

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How do I have VSCode render multiple collapse indicators?

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Here you can read about folding in Visual Studio Code.
As you can it provides syntax aware folding for language as Markdown, HTML, CSS, LESS, SCSS, and JSON.

I recommend you try change the setting for your language as indentation as mentioned in the document.
Below example HTML.

  "[html]": {
    "editor.foldingStrategy": "indentation"
  },
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