TYPO3 Core

That button is "enable paste as plain text" ("pastebehaviour", I think).

I was able to reproduce the issue with these steps

1) TS Config:

RTE.default.showButtons=*

2) copy some text from a site
3) create new CE text and media
4) right-click on RTE area > from the context menu select the "Enable paste as plain text"
5) click again on the area as you have lost the focus.
6) cmd+v (paste)

_ note: the text pasted appears in a serif 16px font, like an html text without any css; if it were plain text inside the textarea that would be sans-serif and smaller_

7) you can add text to the area but, wherever you click, it will always be added at the top.
8) if you click the "toggle text mode" button you will discover that only the text you entered at point 7) is present, but not the text you pasted before
9) clicking on save, it saves only the text entered at point 7)

If I click the same icon on the toolbar, instead, it works as expected