C++ template copy constructor on template class

A copy constructor is of the form X(X& ) or (X const&) and will be provided for you by the compiler if you didn't declare one yourself (or a few other conditions which are not relevant here). You didn't, so implicitly we have the following set of candidates:

MyTemplateClass(const MyTemplateClass&);
template <typename U> MyTemplateClass(const MyTemplateClass<U>&);

Both are viable for

MyTemplateClass<int> instance2(instance);

Both take the same exact arguments. The issue isn't that your copy constructor template doesn't match. The issue is that the implicit copy constructor is not a function template, and non-templates are preferred to template specializations when it comes to overload resolution. From [over.match.best], omitting the unrelated bullet points:

Given these definitions, a viable function F1 is defined to be a better function than another viable function F2 if for all arguments i, ICS_i(F1) is not a worse conversion sequence than ICS_i(F2), and then
— [...]
— F1 is not a function template specialization and F2 is a function template specialization, or, if not that,
— [...]

That's why it calls your implicit (and then, your explicit) copy constructor over your constructor template.

When you do not have a copy constructor in you code, the compiler will implicitly generate it. Therefore when this line is executed:

MyTemplateClass<int> instance2(instance);

A copy constructor is being executed, though obviously not yours. I think that templating has nothing to do with it.

Read more about it here: Implicitly-defined copy constructor