It's worth mentioning that these plants have remained on the heatmat set at 78 degrees Fahrenheit to overcome the basement temperature and receive about 1oz of water daily.

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P.S. A few tips of the cotyledons have begun to shrivel up (about 1/8th of an inch) and turn brown. Is this normal?

Your soil looks really wet. Peppers don't like wet feet. What kind of soil are you using?

I just watered it, it's the best potting soil I used out of three varieties. I'm not sure the brand since it's a few years old and was bone dry until I mixed in some water.

It's this loose mulch that has pieces of wood and what feels like sphagnum peat moss. I bought a new bag and it was labeled Miracle grow with moisture control. Feels just like this stuff.

Yep, I almost guarantee it's too wet with that stuff. I would use it without amending with perlite and only if it was given to me. I certainly wouldn't buy it.