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So fun! Rawhide does expand and shrink tremendously with water. I made some big drums using rawhide that way when I was young. We used to soak cowboy boots and wear them wet for a couple days to break them in. Leather can be stretched when wet. Still might not be a great idea with a hat, understood. But if you wet it, hold it in a stretch as it dries, it will stay at the stretched length. At least that's been my experience (with things other than hats). If you heat wet leather enough you can turn it into a somewhat brittle and useless hard plastic-like substance. When I did leather crafting as a kid you could use this fact as a technique to make stamps, by embossing a small piece of leather with a pattern, while wet, then put it in the oven and it hardens such that you can impress that pattern into other soft leather. I can't believe I even remember that, from when I was maybe 10, 60 years ago, but I'm lucky now if I can remember 60 minutes ago
Vintage sweatbands can look great, feel comfortable, and give you years of careful use. However, they have often deteriorated and moisture reveals the damage that is there. The water doesn’t “cause” the damage, but the water can take a serviceable and good looking leather sweatband and turn it into an unwearable shriveled mess.