Yes, the effects can definitely be stacked. As pointed out, it means that the PC will most likely kill any NPC s/he does even incidental harm to, which should delight good MCs everywhere.
I think it's also worth thinking about how the two traits are different, descriptively, and how that reflects on the PC and their attitude towards violence. On the face of it, 'merciless' and 'bloodcrazed' may be somewhat incompatible as adjectives go, so what is it that is going through this PC's mind when they commit violence? Is their merciless edge the result of training that remains active even as they give in to the glorious madness & blood? Or is there something about the kind of crazy they get, once a fight starts, that results in them acting completely without mercy?
Taking both traits is obviously mechanically interesting, at a baseline, but I think it's the job of all the players involved (MC included) to also consider how it may be fictionally interesting. I mean this PC is basically as effectively-violent as it is possible to be in AW -- maybe the Maelstrom has some questions to ask him/her about that?