Developmental studies show that young children have only a superficial understanding of sex and gender (at best). For instance, up until age 7, many children often believe that if a boy puts on a dress, he becomes a girl. This gives us reason to doubt whether a coherent concept of gender identity exists at all in young children
When social influences are weakened (in more egalitarian societies such as the Nordic countries of Europe), the sex-related differences in personality and preferences actually increase (the opposite of what one would expect if men and women were wired in an identical fashion). This suggests that as environmental pressures become relaxed, innate sex-specific preferences surface.
Put another way, it’s a self-assessment of one’s stereotypical degree of “masculinity” or “femininity,” and it’s wrongly being conflated with biological sex. This conflation stems from a cultural failure to understand the broad distribution of personalities and preferences within sexes and the overlap between sexes.
To summarize, a lack of understanding regarding the distribution of sex-related personality and behavioral differences has led to confusion that impacts children who fall at the extreme tail-ends of the distribution, and who would be statistically more likely to grow up to be gay, lesbian or bisexual adults if allowed to experience uninterrupted puberty. Additionally, telling a child that he or she was born in the wrong body pathologizes “gender non-conforming” behavior and makes gender dysphoria less likely to resolve.