Octopus City Loop: The instrument you use in the melody in the second phrase reminds me of the water levels in Super Mario Odyssey and gives this a watery vibe for sure. Your octopus city sounds so peaceful - I feel that I could float in this city listening to this tune for a long time all the while feeling very content. I think that using three separate instruments in the melody is a very good choice you made to make this short loop not feel stagnant and to keep it moving forward with lots of replayability.
Did I imagine the town?: I think so! If this were in a game about an octopus, I think this would work very well as a home town theme before they set out on their adventure. Great work and thank you for sharing!