How can I decorate this small bathroom window?

I would just put up a curtain to hide part of it and then hang a mobile made of shells

I love Adrienne's idea. If you have privacy enough to be able to just need to open the window a little for ventilation, I would skip the curtain and just make the seashell mobile -- really tight -- google seashell mobiles for inspiration!

You could give the illusion of a larger window...? Using styrofoam, make a cornice. Have the bottom of the cornice only cover the top inch of the window. This makes the window seem taller. Making the cornice wider than the window will allow you to hang a curtain rod behind the cornice, then place breezy patterned curtains along the sides of the window. You can cover the cornice in any fabric you choose or you can get creative and cover in a white plain fabric, then wrap a lightweight rope style net around it, and place a couple of shells or starfish in the netting. Cover the window with a pull down shade or blind of your choice. Here's the link on how to make the cornice...

https://www.hometalk.com/diy/windows-doors/windows/styrofoam-cornice-board-out-of-tv-packaging-30dayflip-14362489

Perhaps a spring tension rod and a curtain like this:

https://www.amazon.com/Curtains-Starfish-Multicolor-Seashell-Bathroom/dp/B07JQ9Y55L/ref=sr_1_13?s=home-garden&ie=UTF8&qid=1549056391&sr=1-13&keywords=seashell%2Bcurtain&th=1

Or something like this that lights up:

https://www.amazon.com/Nautical-Decorations-Bathroom-Apartment-Centerpieces/dp/B07MDBFMSX/ref=sr_1_9?s=home-garden&ie=UTF8&qid=1549056487&sr=1-9&keywords=seashell+on+string

Free hand and paint shells or add vinyl to the window and paint the frames.

not sure if the photo was taken at night or if you do not get light through that window, but finding a nice window film that might be an ocean type feel would be nice. They are easy to cut to fit each glass panel and would add some light but still give you privacy.

I put an example below.

seaside colored shutters will bring in the outdoors and make the space feel larger.

It looks like you painted a vinyl window that may need to be touched-up. You have a nice deep sill and I would play it up by cutting 4 boards to line the inside and stain it in a grey driftwood color. You can get away with not attaching the wood if you cut the side pieces to fit in tight holding the top and bottom in place. Since your window is a slider it means you have to keep the display to a minimum if you open the window. Use the inside sides to display larger shells and starfish (I have used clear caulk to hold shells in a shadowbox). Wrap some rope around the outside edge of the boards to frame your window. You can also glue smaller shells to the rope. If you do not open the window you could add a shelf. Put a nice big conch shell on the sill.

start by removing all the clutter on window sill. kinda dangerous to have a plugged in alarm clock where theres a lot of moisture/humidity that's in a bathrm

Yes but this one has a plug Ellis. See the grey plug hanging of the left of clock. Not a wise location for a electric clock in a bathrm on a window sill.