The Blade of Kakariko is a unique iron sword equal in strength to an Ebony sword, with the weight of an iron sword.
It is found in the Freezing Caves, in the Mayor's House, embedded in a bed on the second level of the building.
The bloody situation involving the Blade of Kakariko is meant to be vague and open to interpretation.
Given the tilted display plaque above the bed, it is possible that the sword fell and killed whoever was sleeping beneath it.
However, the depth into which the sword has been thrust into the bed beneath it implies another possibility: that a murderer hastily grabbed the sword from its plaque and plunged it into a sleeping victim.
The absence of a body may indicate that the victim was only injured, not killed, and struggled with their attacker. The "victim" may also have been newly transformed into a monster or an undead being and the Blade of Kakariko was used to end their misery.