I used Cat potion. I went all the way to the waterfall (although no blood trail was leading there). Cedric is still nowhere. The Wikia page says, he's near the waterfall. I'm at the waterfall. Then I watched the embedded video. It edits out the part how he finds Cedric.
Seriously, this should've been a straightforward quest, like in Batman Arkham Asylum or Arkham City. But, no, I have to follow a blood trail in the middle of a riot. Who's idea was this? I'm still looking forward if there will be any good parts in this game. Like the ones part 1 had.
There's a big tree just at the northwest corner of the lake. Cedric is lying under the tree, not particularly well hidden but you might miss him unless you walk right up to him.
If you want straightforward quests with hand holding, you need to adjust your expectations to get anywhere with this game. You're looking for a wounded elf who is hiding. It's bloody well not supposed to be easy.
I hear always this hand-holding argument. Yes, I know that following a blood trail in the middle of a riot should be almost impossible. No, it should be 100% impossible. This is why I don't understand why is this an unavoidable mission? If the only way to find Cedric is to follow a blood trail on the streets where many people were massacred, then it should be an automatic failure. There should be a cutscene with narration from Geralt like this: "It will be impossible to follow one blood trail in the middle of a riot. I should look for another way."
Witcher 2 borrows so many things from the Batman games and implement all of them terribly. Following the assassin in Arkham City was hard, but it wasn't hard because the game didn't know which way I am going. Seriously, I found a blood trail when retracing my steps and Geralt hinted that I'm on the right track.