Instagram's filters change people's looks greatly. This can give a wrong impression about a person as they might seem much more attractive than they really are. See why Instagram's filters are bad.
According to psychology, a person can get attached to people posting pretty pictures even if it doesn't really look like them in real life. In such a case, even if a person knows how a person looks in real life he can still get attached to his pictures on the unconscious level.
Many people try to post pictures to show that they are living a happy life. This kind of behavior can result in getting a false impression about others. This could lead to sadness or even depression. See why Instagram is bad for your mental health.
Many people try to broadcast a certain life style through the Instagram pictures they post. Those people can give the false impression that they are living a certain life style, whereas they could be living a totally different one.
Because Instagram has much less communication options than Facebook and is generally more suited for passive viewing, a person might think that he has developed a good relationship with others using it, whereas it could be just an illusion.
Because Instagram users are usually subject to heavy peer pressure, they might be forced to fake a life style that they are not living or to modify their own pictures to make them look better.
Under the effect of the tough competition people face on Instagram they get forced to only show their best side unlike on Facebook where people usually share both the positive and the negative. See why Facebook is so negative.
Unlike Facebook where a person's personality can be revealed through his posts, words and thoughts, Instagram can hardly allow a person to really get to know someone as it's focused on pictures.