Thanks everyone for the answers and etiquette tips. Upgrade to 35 from working 34 resulted in black screen after reboot. Tried Fedora 35 live CD - keyboard did not work through the installation process so I could not set the encryption passphrase but I decided to proceed and see what happens next. I do not have any external keyboard at the moment to check with, tried screen keyboard but it did not appear for this input. The system booted well with everything working (kernel 5.14.0). It seems that dnf upgrade and kernel 5.14.9 did not break the system. I have also tried to install Fedora 34 without disk encryption and then performed dnf upgrade and everything was also fine. Not sure what I will do next, I have also an old dell xps 13 laptop with Fedora 34, now I'm a bit scared to upgrade to 5.14.9 and reboot it :). Probably I will try to encrypt the disk manually and see if it works or try to figure out what breaks the process.