A better update system is needed had this happen to me after came back from long break, thought it was catching me up on updates, but it just never ended, just removed local content see what happens next.
This is happening to me too. I thought maybe it could be because I moved the content folders in my project, but it’s affecting other items as well. Funnily, it’s also telling me that the engine itself (5.7.2) has an update, despite there being no option to perform an update.
UE 5.7.2 being reported as ready to update is correct, since the latest version available is 5.7.4.
Were you running 5.7.2 at that time? If so, just close the engine and it should properly allow you to update it. Just make sure there is no child process of UnrealEditor.exe running in the background.
Oh, thank you for pointing this out. I’ve queued up the update now.
The thing is, I actually can’t find any information about what the current latest version of the engine is anywhere on the internet(??). The “Release Notes” link in the launcher just brings me to a page about UE 5.0. 
This has started to happen to me as well. The whole UE launcher (not to mention FAB) experience has become super frustrating. I have multiple items in my library showing the orange dot and when I select update it just verifies and the dot goes away. Comes back when I relaunch. Makes it hard to know what genuinely needs updating or not.
Getting fed up with Epic and their atrocious user experiences. The orange dot in itself is a poor UX decision for indicating an update is required. It’s super hard to see the orange dots when you are scrolling through 1000 assets that you can’t categorize or sort in any meaningful way. Why not color the whole item bright orange so you can actually spot them? Or add a toggle that auto hides everything else.
Sorry for the frustration.. I’m just tired boss. Epic just wears you out with a thousands cuts.
Welp, today the launcher had an update! The release notes don’t specifically identify the issue in this thread, but I saw “Bug fixes” and was hopeful! But no. After updating the launcher, I restarted my PC and the issue…persists. My last communication from the Fab team after I asked for an update was, “The development team is actively looking into this issue. We can not give you an ETA at this time.” That was a week ago. FYI
Same here, same infinite update problem that’s been going on for a month. The only thing this fix changed for me is that the launcher no longer crashes on startup.
Also, pay attention to the storage space containing your vault. Because when I tried to update about a hundred assets, it didn’t overwrite the files but duplicated them!
This quickly filled up my SSD, which had over 90 GB of free space! So, if this happens to you, remember to delete the local content of the problematic assets in the launcher.