This works perfect for small coffee cups and water bottles. I have also used it for storing my sun glasses in.
1 skein of sock yarn (Tofutsies)
5 size 3 double point needles (or your choice for knitting in the round)
Cast on 64 sts
Knit in the round using pattern k3, p1
When you have reached the desired length start your decreases as follows
Needle 1; k1, ssk, k to last 3 sts, k2 tog, k1
Repeat for other needles
Alternate a decrease round and a plain knit round till you have 24 sts left
k to tog all the way around
k 1 round with no decreases
Slip all sts onto yarn and pull tight.
This will form the bind off and a flat square bottom.