Happened when i dropped my Soggy Log Suit on the ground in caves.
I was a bit low on sanity too if that matters (cause i seen bug report about the Crown going invisible when low on sanity)
Item can be still picked up but it's not visible on the ground.
I'm not using any mods BTW
Drop Log suit on the ground.
-Below 80% sanity
-Log Suit being soggy wet