Leveling Areas - (Scaling)

While leveling, you will travel to areas in which your item level is scaled to a certain value, which means that if you have more item level than this value, your Hit Points and Damage will be lowered in those areas, to fit the maximum value allowed. What matters in those circumstances are your stat percentages and damage bonuses, nothing else. Increasing your item level further will do absolutely nothing and only a good balance of stats and playing well can save you (positioning is especially important to deal more damage and avoid taking combat advantage damage). You'll find out that most of the areas and dungeons in the game are scaled content, which makes your total item level quite irrelevant as long as it's above the scaling level. Note that you start the game with 5000 item level.

Neverdeath Graveyard: scaled to 7k item level. Vellosk: scaled to 9k item level. Ebon Downs: scaled to 12k item level. Icespire Peak: scaled to 15.5k item level. The Chasm: scaled to 19.5k item level. The Whispering Caverns: scaled to 25k item level.

Note that The Loose Thread quest, when you return to the Adventurer's Guild after The Whispering Caverns, is not scaled. And it's coming out of nowhere... To survive it, you must be quite careful at evading all of the attacks (running around the arena during the ghosts phase helps a lot), and use potions / health stones if you need them.