Not big fans of H.P. Lovecraft, I'm guessing? The horror comes from NOT seeing the entire creature. It comes from witnessing what just the tip of this proverbial iceberg can do to your ship. It comes from the little details like the skeletal Kraken remains on various beaches implying there's not just one of these thing, there's an entire race of them. Here's a disturbing thought: Maybe the ones you've fought so far are only babies. But hey, the game's less than a month old. I'm sure this is all the Kraken will ever be, amirite?
Your reward is keeping the treasure on your ship. "But it was mine to begin with!" No, actually, if this game should have taught you ANYTHING by now, it's that the treasure isn't "yours" until you or a crewmate cash it in.
"But it's a waste of resources" Well, yeah, but how hard is it to resupply a ship? You can fully stock a galleon by going no further out of your way than to look at any barrels you happen to walk past. If you're lucky enough to find supply crates (or voyages to collect them), then theoretically, there's no hard limit on how many supplies your ship can hold.
"But other ships can just roll up and gank you" Weren't you JUST complaining about the fight being too easy & boring?
"But the PoTC Kraken was better" This isn't a PoTC game, you don't get to fight that Kraken. Would you like to? Because you can in Lego PoTC. Gonna warn you tho, if you didn't like this Kraken fight, you're gonna think the Lego one is lame.
By the way, when a tentacle is holding you, you can't do anything EXCEPT attack that specific tentacle. You can't bail & repair, you can't attack the tentacle wrapped around the ship. Even once you get free, you still have to make your way back to the boat, during which time you are 100% useless to the fight. The tentacles temporarily turn a crew of 4 into a crew of 3. It's a widely-used gaming mechanic called "crowd control". You're probably more familiar with being on the other end of it.