Glowing baloobiuses are a survival mechanism
In the original series episode "Scared Silly", we learn that a Fraggle's baloobius (the tuft of fur on the end of their tail) will flare up when they get scared, which very obviously sounds like a survival mechanism to scare off predators. So what if the glowing baloobius is too? Perhaps once upon a time, ancient Fraggles all had glowing tails, which could help them to see in the dark - they do live underground after all. Over time, the Fraggles lost this feature, however, and nowadays it's more of a mutation that only occurs in a few select Fraggles. Uncle Traveling Matt's baloobius glowed too...
Sometime in his youth, Uncle Traveling Matt discovered that his baloobius glowed, so he cut it off. That's why he doesn't have one... Wander Mcmooch might reappear in a later season.
Whether he will have Hidden Depths unlike in the original or be the only truly evil character again remains to be seen.