Yes, that's somewhat the point. You can see it in action in this comment. Rather than replace, it allows people to see a Piped link too instead of YouTube one.
Here's a really cool YouTube video: https://youtu.be/dQw4w9WgXcQ (the bot will reply to this)
You can now try sending it a message mentioning communities in the format
[!community@instance.tld](/c/community@instance.tld)
and it will try joining it :)