When does the treasure merchant Sheikah Stone become available?
Solution 1:
You can only access the Moonlight Merchant toward the end of the game after you completed the Hero Song.
At this point, the monsters will leave the Waterfall Cave completely and you will find the butterflies inside at night.
Solution 2:
The monsters only leave when you've made Batreaux human. I'm not sure about the Song of the Hero - I think you need to have received the Stone of Trials first but I'm not sure.