This page of our guide to Ghost of Tsushima has a description of the battle with Tengu Demon - this boss appears in The Curse of Uchitsune side mission.
To face this boss, you first have to find the right location - the maps will lead you to it. If you want to find the walkthrough for The Curse of Uchitsune, check out the dedicated page.
Let's start with basic information. Even though your entire character is covered in blood, he hasn't lost any health points. It's just a cosmetic effect.
Another important thing is that your skills and attacks haven't changed. Although the game suggests you are not in your normal state, nothing has changed.
Your opponent won't be a threat if you know how to avoid attacks. It's best if you overwhelm him with attacks - don't let him move.
The bats can be the biggest problem of this fight. They often cover the opponent making the timing more difficult.