how do I hide this icon?
That icon is shown if an app is capturing parts of the screen. For example BTT does this when using the "Pin Window To Float On Top" action or when using the Notch Bar feature.
There is no official way to hide this, but there are a few tricks to achieve it. For example you can start the app that causes the icon to appear with this terminal command:
screen -dmS BetterTouchTool /Applications/BetterTouchTool.app/Contents/MacOS/BetterTouchTool