The item you get in that chest is the avenger sword. It is extremly powerful even if it seems it lowers your attack power because it puts you in auto-berserk.

I don't know for other versions but I played the PSX version and there was a bug with the avenger. You could start the combat with say ... blood sword equipped... and then switch to avenger. You would get the gfx or the avenger attacking, you will get the auto-berserk status ... but the game forgot to change your stats it seems, since I was draining life with avenger now.