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There is a lot of documentation from Apple on how all of this works, but this is indeed expected behaviour. A way to make this smoother would have been:
1. Doing the password reset
2. Reboot straight back into recovery
3. Update your new password back into your old password
4. Boot into macOS, your default keychain will unlock but you'll still have to re-authenticate to iCloud since your machine-user identity combo will no longer match with what iCloud expects. (not sure if this is part of Octagon Trust, but there are various interesting layers to this)
There are a number of much more in-depth technical guides and specs, but just listing out random articles (or the Black Hat talk(s)) would probably rob someone of a nice excursion into platform security.