Ever since the ability first appeared in Avatar: The Last Airbender, imaginations ran wild with just how powerful bloodbending could be. When The Legend of Korra took the ability to the next level, many fans were prepared to proclaim it the strongest ability in the Avatar world and tout is as unbeatable. However, a more critical look at ability reveals the bending subskill to be a lot less powerful and a lot more situation-specific than most fan match-ups would have you think.
When Hama first introduces the ability, its most immediate limitations are clear. It requires a great deal of control and the power of a full moon in order for a Waterbender to even think of using it. Hama used the ability to abduct helpless villagers well before Team Avatar showed up, and when they tried to stop her she nearly defeated them single-handed. It was only through using her waterbending mastery that Katara was able to pick up on the skill and overpower Hama, swearing to never use the ability again and only resorting to it once more throughout the rest of the series.
Right from the start, it's clear that bloodbending is situational. Absent other sources of water and during a full moon, Waterbenders could survive in an unfamiliar environment with the skill, much like Hama did. The ability to totally control another person seemed so impressively powerful that fans' imaginations began to run wild, neglecting the substantial limitations on the form. When The Legend of Korra introduced characters who shed the full moon requirement and prominently featured bloodbending in the series' first season, that's when the gloves really came off.
Due to a seemingly inborn ability, the crime boss Yakone used bloodbending in broad daylight to paralyze a courtroom of unsuspecting people. Many of those in the court room included powerful Benders like Toph and Aang, and Yakone used the window of opportunity to escape the courtroom. When Aang caught up to Yakone, he was able to use the Avatar State to resist the crime boss' bloodbending, but not before Yakone attempted to end Aang's life once and for all.
The display of bloodbending he unleashed on Aang was certainly gruesome, what with Aang's limbs twisting around and the meaty sound effects. But then... Aang was fine. He entered the Avatar State, removed Yakone's bending once and for all, and suffered no physical injury whatsoever. Even with the full force of his power focused on one target, Yakone was unable to execute a person in any kind of reasonable timeframe. By comparison, most low level bending attacks would have created more lasting or fatal injuries. The reason for this is that bloodbending is defensive, all about keeping an opponent from attacking you, rather than outright hurting them. However, this aspect of the skill seems to have been lost in the shuffle.
With Yakone's two sons, Amon and Tarrlok, come further displays of bloodbending. Tarrlok demonstrates a capacity for rendering targets unconscious, while Amon employs the technique to help him evade attacks or paralyze victims so he can remove their bending. Amon proves the clear superior to Tarrlok, overpowering his bloodbending outright, and yet illustrates the subskill's worst limitation: it can be physically overpowered.
The first time it happens is against Mako, who manages to get a free hand to release a bolt of lightning against Amon. A more brutal opponent would have finished Amon off right there, but Mako instead chose to escape with Korra. Not long after, Korra herself managed to overpower Amon by using airbending for the first time ever, with Amon so stunned he took multiple hits before she flung him out a window. Doesn't exactly sound like bloodbending's an unbeatable super power.
Believing bloodbending is overpowered is a problem of ignoring what it truly does. It requires line of sight, requires concentration, fine control and is best used in a defensive capacity. Against Benders that don't necessarily need their limbs -- like Combustion Man, or even Zuko, who can firebend through his mouth -- or any bender physically strong enough to power through it, relying solely on bloodbending is unlikely to get a Waterbender far.
Part of what seems to make bloodbending so cool is a "Boba Fett" effect that makes the skill seem deadlier than it's ever actually shown to be. Fans will fantasize about what an R-rated Avatar series could do with bloodbending or tout the defense that the show is "just for kids," but that just isn't justification for hyper-violent applications that just aren't probable in-universe.