If you are referring to the light on the right, that does go blue for BT and green for optical, that is normal, but the flashing is not, it should be solid.
So that then indicates a hardware issue, meaning a problem with the control board inside.
This issue could be a manufacturing defect, but is also often caused by a power event (shock/surge, prolonged over/under voltage condition, etc).
There is one step you can take here, both as a possible fix, as well as a diagnostic evaluation:
1) Unplug the power cord from the outlet
2) Wait at least 1 hour (60+ Minutes)
3) Press and hold the source button (on the set, not the remote) for 60 seconds
4) Keep holding power button while plugging back in, and for another 60 seconds after. When plugging back in, go directly to the wall outlet, bypassing any power strips or surge protectors.
If this reset process does not work, it would unfortunately confirm an internal hardware failure.
This is something that would require repairs to correct; if you are under the 1 year warranty period still, then klipsh would replace it for you, by calling(###) ###-####
Best regards, ***** ***** for the news,