I think in my opinion, if you're doing a sprite of some sort for a fakemon, the image is far too large. Most sprites for Pokemon hacks are below 100x100, while yours is around 1000x500. Downsizing your kraken is a good idea, as you can still get a good amount of details into a smaller canvas, but something that big won't really count as pixel art honestly, because there isn't much control over how each pixel are placed in the image.
Having actual shadows (shading) on the tentacles and rest of body may also be a good idea, as you want to make it 3D. Just having shine isn't enough from what I see, and what you have looks pretty flat to me.
Last thing, you might want to look at some pictures of octopi or squids, you do seem to have some anatomical quirks like the neck area being too small and such.
This is all my opinion, so take it as you will. n_n
