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To hatch this egg, pick up the horn and blow it.
A Skellody won’t stay animated for long after hatching. It needs its horn to be played regularly in order to remain "alive." After a certain number of hours of horn-playing (which varies for each Skellody), it will eventually learn to play the horn on its own.
To return a Skellody to its lifeless bones, simply take the horn from its hands to stop it from playing. You'll need to complete the process again to reactivate it.