You can embed images but to automate it happening from links costs money to employ as it takes server space/energy.
If everyone knows embed coding and pasted precisely that, there comes to be a new issue; enabling HTML and CSS will mean users can post trip-scripts (so you visit this page and it redirects you to another) among much else.
It's exactly as what RM said. I am already -14$ dollars per month for the hosting services, self hosting images would bump the hosting expenses even more and frankly, I am not motivated to pay even more outta my own pocket. Images could be hosted elsewhere but sometimes it's also tricky and another problem is that allowing image posting may screw up the design, i.e. lots of tall ugly posts with only image in them. So it may come in the future, but I am not exactly sure when.