

AFAIK you have to give the app location access for it to be able to scan sourrounding networks and see the SSIDs (At least that’s how it works on the newer Android versions circa around Android 10 or 9). For bluetooth you have to enable at least the nearby devices permission. If you do these things then it makes sense that the app can track your location.
If you like VSCode you can try VSCodium which supports almost all features of VSCode but should be fully FOSS without Microsoft proprietary blobs.