Welcome to the Orchid Board!
Your plant is behaving normally.
This group of orchids - Catasetinae - has a completely different growth pattern from Phalaenopsis. And realize you have a seedling, but it can grow very much larger in this very growing season. Different Catasetinae flower at different times of the year, but their growth pattern is pretty much the same:
In habitat, they are leafless and dormant in the long, warm, dry winter. A few weeks before summer rains arrive, they begin to make roots. Then they begin to make shoots. It is still completely dry and rainless at this time.
When the summer rains arrive, the roots system is very extensive, the shoot is at least 10cm long and sometimes longer, and the plant is ready for the drenching rains. They remain wet from rain all summer, and the new shoot grows into a large pseudobulb with very large leaves. The plant usually makes multiple shoots during the summer growing season.
At the end of summer, rains stop. As fall progresses into winter, the leaves dry and fall off. The plant goes completely dormant for the winter. The old roots mostly die.
Then the cycle repeats again.
Your plant is dropping the leaves it made last year. This is normal, but it usually would have happened long before now. No problem. The plant is about to begin this year's growth.
Dormancy, just as new roots are forming, is the correct time to repot these. You guessed correctly. You could also have left this plant in the sphagnum pot; it would have been fine for another year.
Don't water the plant yet. Put it someplace warm, bright and humid. Small plants without shoots can't take much direct sun, so it's not ready for that yet. It will soon begin forming more roots, and a shoot. But it won't be time to water yet.
When the new shoot is at least 10 cm long, and there are plenty of new roots about 6-8cm long, begin watering and fertilizing the plant heavily. Many people stand the pot in a saucer of water. This is not recommended for many orchids, but Catasetinae use huge amounts of water every day.
As the shoot expands and leaves enlarge, move it into more and more sun. This plant is able to tolerate full European summer sun. Also, it grows much better with warm summer nights. Some people in northern Europe find it does better in a greenhouse, so nights can be warmer. I think your nights might be warm enough for it to be outside. Watch for squirrels and rats!
As it grows, begin fertilizing heavily, at every watering. Some people recommend using 0.7-1.5ml of powdered 20-20-20 fertilizer per liter of water at every watering, with a flush of pure water once a week or so.
As it is growing, pay close attention and watch for spider mites. These are tiny 8-legged creatures that can kill Catasetinae in just a few days. They are more a problem during warm, dry weather. You can read about spider mites here on Orchid Board. From the top maroon menu choose the Search feature. I strongly recommend you read about them in advance so you know what to watch for, and are prepared.
With proper care, the new shoot or shoots that grow on your plant this summer will be several times the size of the existing shoots. You will be surprised at how large the plant will become. There is a good chance it will be large enough to flower in the upcoming late winter or early spring.
You can read about growing them on the Sunset Valley Orchids Web site. Fred Clarke, who runs SVO, hybridizes a lot of these.
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