Oh no! Maybe you could embelish it a bit and knit another icord, felt that and turn it into a little evening purse kind of thing?
I had the opposite problem with my first felting attempt (handpun wool).
After the first cycle, I check it excitedtly and it looks exactly the same as when I knit it, but wet.
So, another cycle then check. Same thing. Yet another cycle. And so on. It took me about 7 cycles before it looked a little felted. I was tired, it was a coaster so I took it out and called it done.