I have no idea what that is, but if this were my fish I would euthanize it. The fish is clearly stressed, from the appearance in the last photo. And some sort of healing without knowing exactly what this is and treating it accordingly, is in my view impossible.
Only yesterday I destroyed an Emperor Tetra who had a similar-looking red lump covering the caudal peduncle. These things can spread, depending.
I've decided I'll have to put him down some time soon. The bump only gets bigger by the week. Everything I've read on fish maladies that match his condition supports the idea that it's a tumor of some kind and can't be treated. I'd like to try the clove oil and vodka method this time, rather than bashing the head in (seems more respectful) however I'd don't have any vodka laying around. I do have some bourbon, will that work?
My method to destroy a fish is simple, and very fast for the fish. Net it out, and place it in a folded over paper towel. Quickly fold the paper towel over completely around the fish, and give it a hard thump or two with your hand on a table. Fish is dead instantly.
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