I guess... Duolinguo should start making a difference between thou and ye in the context of different languages... I mean... ¡Almost every language in the planet has a distinction between plural and singular "you"!
You can't expect Duolingo to actually use thee/thou/thine as English words, because this would mis-lead people who are learning English as a foreign language. English does not use that form any more - we only use plural/formal you.
It is correct, and it's also put correctly on the list of answers, so it shouldn't give such a highlight... perhaps something else was wrong? The grading algorithm has problems with showing what exactly was wrong.
It's not unknown for Duo to highlight the wrong thing as a typo. If you have no actual wrongly spelled words, but you get the word order wrong, that can trigger typo reports on one of more of the correct words.