Quantization results in harmonics in ADC FFT plot
The total quantization noise is proportional to the difference between the fundamental or original waveform and the quantized one.  The more steps, the likelier one can get a closer fit or approximation to the waveform.  So the jumps are still there and will still produce harmonics, but there is less energy available for the jumps to put into the spectrum which those jumps produce, as more of the energy is in the better approximated fundamental.  Conservation of energy, or Parseval’s theorem limits the total power.