Rot on Cycnodes Wine Delight 'JEM'

[OnGoodSoil]

I got this about a month ago. The old pseudobulb is about 2.5 inches tall. It is in Sphagnum. Is this basal rot? It seems to be a little less firm than the surrounding green. It does not seem to be exactly on the base of the bulb and does not seem to have yet affected either of the other two. What do I do? Do I cut my losses and carefully cut off the sick pbulb and cover the wound with cinnamon? The new pbulb is probably about half grown. I might just do what I said above because these type of things spread quickly from what I've read. Any advice will be appreciated. Thank you...and HELP!

[estación seca]

Read about this group of plants here:
Sunset Valley Orchids - Superior Hybrids for Orchid Enthusiasts
It looks like you've been keeping it really wet with all that algae. Maybe not such a good idea. I would let it almost dry out and see how it looks.