The hydroballs act as a biological filter for nitrogenous waste - they don't filter the particulate matter in the water, which is what the red material is (from the coconut fibre). Whatever way you've set up your substrate is incorrect - if you do it right, the coconut fibre is not sitting in water, but above it. That way it's always moist but not soaking in water. The water in the base of my dartfrog terraria is only slightly tinted, and the older terraria have crystal clear, untinted water.