I'm not in favor of reducing the conversion time, as I don't think it particularly offers much benefit in exchange for the increased risk of price manipulation. I don't really agree that people who don't want to risk 3.5 days for a 5% return would suddenly want to risk 1 day for a 5% return. Sure it could move a few on the margin, but mostly not. Either of these returns is more than ample.

The main obstacle IMO is not the 3.5 days or the 1 day or even the 7 days it was before (IMO 3.5 days has worked about the same as 7 days; why?). It is just the small size of the market and limited overall market maturity (e.g. few if any derivatives) so there is limited capital people are willing to invest to get involved. Are any of the big crypto trading and market making firms involved? No. But the reason they are not is the size of the market, and not the conversion time.

I don't think anything really bad would happen with 1 day, but I think it is a pointless distraction to look there.