Looks like it's shaping up!
Something I'd suggest working on soon is getting a walking and dashing/running system in place. Like if the joystick is flicked to its max horizontal range (in either direction) within a very short time it registers as a dash, which turns into a run after about half a second, and otherwise it causes the player to walk.
I'd also suggest getting attacks to work (and other controls such as dashing and shielding) before doing multiplayer. Considering your control scheme, I'd set a volume control to shield, then with whatever the Attack button is, have one Neutral Attack which is the same in the air and on the ground, then Forward Air, Back Air, Up Air, and Down Air (direction + attack in the air), and since you have a joystick you can have both Tilts and Smashes on the ground, so Forward Tilt, Up Tilt, Down Tilt, Forward Smash, Up Smash, and Down Smash. With the implementation of the dashing and running state you can also include a Dash Attack. The only big requirement for these attacks is that the Up Air has to be the character's recovery move (usually the Up Special in normal smash games).
Another option is adding Grabs, either by pressing Shield and Attack together or setting another volume control button to Grab.
Graphics-wise, I'd also suggest making something cool for the A and B buttons so it's not just a letter in the circle. Maybe a neon letter to match the button outline, at least.
