iCloud & iCloud Photos · Troubleshooting iCloud space
Why does Storage Studio say Connect an Account instead of Keep Cloud Online-Only?
Short answer: Storage Studio found no cloud folders on your Mac, such as iCloud Drive or a Google Drive or Dropbox folder. Turn on iCloud Drive in System Settings, give Storage Studio Full Disk Access, then reopen it.
Because it didn't find any cloud folders on your Mac. The online-only option only applies to cloud folders macOS keeps locally — iCloud Drive, and the folders of apps like Google Drive, Dropbox, OneDrive or Box. With none present, Storage Studio offers to connect an account instead.
If you use iCloud Drive, check it's turned on in System Settings → your name → iCloud, then reopen Storage Studio so it looks again. Make sure Storage Studio has Full Disk Access too.
Accounts you add in Storage Studio's Remotes & Accounts are different: they're places to transfer to, not folders macOS keeps on your Mac. See cloud accounts.