Again, I was bending the expectations here even more than with the Will-o-the-wisp. Everyone expects the Kraken to be a giant squid ever since that French craze about the colossal octopus attack? Well, don't make it a giant squid then.
Turns out that the Kraken wasn't even named that way at first, and was sort of fused from two vague Scandinavian legends, one of a giant snakelike or crablike thing with appendages, and another of a floating island that is prone to submerge because it is really a giant whale or something like that. (That latter tale is universal, judging by Sindbad.) So I made it a carnivorous floating island with appendages resembling giant octopods. The siphonophorae connection was obvious then.
This was fun to make, and turned out the worst nightmare fuel of three.
I managed to match every requirement: red glowing eyes - supplied by the canine; scaly purple skin - demodex mange; pointy fangs - the parasite's mandibles; blood diet - the parasite interferes with swallowing; spikes along the back - fungal fruiting bodies; unusual behavior - the brain fungus controls the canine; bipedal hopping - brain infestation results in forelimb paralysis and atrophy as a side effect.
Yes, it is all inspired by real parasites. Tongue lice are real isopods (i.e. related to the woodlice) attacking freshwater fish, Cordyceps is a real brain-controlling fungus some species of which burst out with fruiting bodies out of the host arthropod's body while it is still alive, and Demodex canis is an actual canine parasitic mite which is responsible for at least several "chupacabra" sightings which were bad cases of the mange it causes. The need for a parasite-infested dog to be parasitised by a parasite infested by yet another parasite, and then for the disease to get advanced, explains why these cryptids are so rare.