Bag measures 8" wide x 7" high with flap folded down.

Materials:  1 - 50 gr ball Squiggle and 1 - 100 gr ball of Iceland Super Soft Wool. (colors here are fuchsia Squiggle #2265 and violet Iceland #9660)
Crystal Palace Bamboo Needles: SP 9" size 15 or 16" circular size 15
[If you make I-cord for strap, you will need 2 DP needles in size 13 or 15. If you make a crocheted strap you will need a large crochet hook, size L.]

Gauge: the gauge doesn't matter when you are felting

Stitch Used: garter stitch, knit every row. I used I-cord to make the strap, but you could crochet it if you wish.

Make body of bag as follows: Using Iceland, cast on 30 sts, knit 4 rows. Add Squiggle to the Iceland and knit with both yarns for 14 rows, knit 4 rows with just Iceland, knit 14 rows with both yarns held together, end with knit 4 rows of just Iceland. Cast off loosely with Iceland.
Sew up the two sides of the bag.
Make flap: Using size 15 needles, pick up 17 sts along one side of the open top with Iceland and Squiggle together. Knit 2 rows. K2 tog at beg and end of next row [15 sts]. K 1 row. K2 tog at end of next row. K1 row. Cast off loosely.

After knitting the bag and the flap, use the tip of your knitting needle to pull the Squiggle "tails" to the front of the knitting to increase the shaggy look before felting. It's actually fun to pull them through to the front side. (Peek at the back to find the missing ones.)

Make I-cord or crochet strap: Using size 15 or 13 DP needles, make a 4-st I-cord the length desired, the strap will felt about 20% shorter than the unfelted length. Or, crochet a strap with large crochet hook.

Tip: Make your strap first and then use up all the remaining Iceland for your bag and make it a little larger than you otherwise might. Just knit more rows than mentioned above.

Felt your Bag: I felted the bag first and then the strap separately and sewed them together after felting in case I wanted to adjust the length of the strap - but felting either before or after sewing strap is fine.

I put the bag, 3-4 towels, a small amount of laundry detergent in my Maytag and set water for small load. I agitated the bag and towels for a 6 min. wash cycle and then let the washer finish with a normal rinse and spin cycle. I laid the bag on a dry towel to dry and turned it over and patted the flap into shape every few hours. It took a day and a half to dry. I just tossed the strap in with a load of regular laundry and let it run through the cycle for a good solid felting.

I sewed the strap to the side of the bag with strong cotton thread in a similar color of purple.

This bag would work well with a purchased handle or a shorter strap, too.