Tiny bags are virtually useless to most people, since medium bags are a way more efficient use of limited hotbar space, and large to huge bags in terms of efficiency and barrier to obtain. This wouldn't be any problem since tiny and small bags are an optional feature that nobody has to use, but tiny bags are a loot that can be found in treasure chests, replacing what could have been something valuable and useful to a player on any level with something the player won't be able to use, or to sell either. Being able to upgrade them would fix both their disuse, and their lack of a market. Players who are looking to make a small bag of holding could save on pristine leather use by buying the tiny bags, the same process holding true for medium bags. The market too, would greatly expand for tiny and small bags with their new purpose. With the recipe to upgrade them, they go from a niche item that's only used for collections or by select new players to something of value for enterprising artisans and treasure hunters.