I like the concept that the DS games use for penalties. You die once, you lose your shit, but nothing permanent or severe happens. Die twice in a row though, gg. Mistakes are integral to improvement, so why penalize single mistakes rather than continuous mistakes, and reward improvement at the same time? For an example of how this could work in implementation: If you have a x5 and you lose, getting set back to x1 is obnoxious, but maybe if you won the round after you lost, you'd be able to get your x5 back. You could also do the same with valour. Lose one round when you don't get valour, you get a x1, get valour the next round though, and you get what you had before you lost.
Of course, this whole thing is undermined by how score is handled. The score system needs improved, most notably by reducing the proximity bonus