The fungal poncho degrades over 30,000 charges of combat, and will revert into a mycelium poncho web when fully degraded. A partially degraded poncho can be repaired using fungal flakes - 25 per 1% - which also requires 21 Crafting and some thread, granting a scaled amount of Crafting experience. If it fully degrades, it will need to be re-created from the poncho web.
The poncho can be cleaned at any point to return the mycelium poncho web, and half of the remaining charges in fungal flakes, rounded up - e.g. an 80% charged poncho will return 1000 flakes. Additionally, alchemy performed on the poncho returns a scaling amount of coins based on the remaining charges.