To my inexperienced eye, it looks like it tried hatching before it finished absorbing the yolk. I have a chick right now that is 2 weeks old, was the last to hatch in the incubator, and he/she had a large bloody umbilical sort of like in your pictures. I thought for sure it'd bleed out but the chick persisted. It's healed now, but the same chick has a bare back for no apparent reason. I'm hoping the feathers will grow in over time.
Most likely all of these issues are caused by genetics. Sorry you lost this one.