Place the coconut milk, quartered onion, smashed garlic, ginger, lemongrass paste, Thai red curry paste, fish sauce, and a pinch of salt and pepper in a blender; blend until smooth.
Pour the blended coconut sauce into the Instant Pot. Add the chicken breasts, chopped red bell pepper, chopped Fresno or jalapeño pepper, and the cinnamon stick.
Secure the lid and cook on high pressure/manual for 8 minutes.
When the cook time ends, release pressure using either natural release or quick release. Remove the lid, set the Instant Pot to Sauté, and simmer for about 5 minutes to reduce the sauce slightly.
Remove and discard the cinnamon stick. Shred the chicken with two forks directly in the pot.
Stir in the chopped cilantro, torn basil, and lime juice, then season with additional salt and pepper to taste.
Serve the shredded chicken over steamed rice and top with peanuts, shredded carrots, and sliced green onions.