After Varnish cache enables from Magento admin catalog menu disappears
Steps I follows to enable cache
*Admin>>> Store >> Configuration
*Advanced>>>> System *Full Page Cache
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According to the steps you have listed you did not export the Magento 2.1 Varnish VCL file and set varnish to use it? You should press the 'Export VCL for Varnish 4' or Varnish 3 depending on what version of varnish you have setup.
I have run into an issue with the frontend menu when my varnish VCL file was not setup correctly.
You can normally find it in the /etc/varnish folder in most linux webserver's.
you can remove the TTL attribute (remove ttl="3600") from /vendor/magento/module-theme/view/frontend/layout/default.xml, and the navigation menu will appear.
For more details regarding this Magento 2 issue, please visit https://github.com/magento/magento2/issues/3421