Fear had to come from somewhere, right?
Inherent feeling in all living creatures. No shape, no mind, no identity, only a presence manifested by moonlight.
The distant ancestors of humans form the first tribes out of fear of being consumed by bigger predators.
The first shape reflects that - a mouth in a mouth in a mouth, willing only to consume. Deep dread with no self-awareness.
Memories appear in dreams, giving rise to ideas. First human dreams of comfort.
More complex tribes, language, culture, and most importantly, legends have been formed. Adults warned children not to go into the pitch black darkness, as something cunning awaits them there. Or so humans imagined.
Changes in people have led to changes in form, he resembles a human more than a beast. First name is given, self-awareness and intelligence comes with it.
He pushes humans to evolve further, making them imagine good and bad spirits. Unknowingly he makes soil for new spirits and his own demise in far future.
All people wish for comfort and new knowledge. Their imagination is limitless, which can be realized in their dreams. Unconscious threads of golden sand gift people what they need the most in times of desperation.
Full self-awareness has been gained, and with it, emotional intelligence and conscious desires. A personality with it's own (annoying) character has been formed. He no longer remembers how to be that old dread or how to change his form, ultimately reduced to the monster under the bed. The only things he can do is manipulate shadows and his own size and, much later, poison dreamsand with fear.
Emotional intelligence had terrible consequences - embodiment of fear became afraid himself.
Sandy's influence has replaced fear with hope, wonder and creativity for many centuries. To this day he is the most powerful spirit. Even if defeated he'll find a way to return, as human imagination has no limits.