Thank you for the feedback :)
The difficulty only increases when you level up. So the snowball effect should not happen, but at some point, it is likely that not finishing an arena means the player won't finish any arena in the same difficulty and therefore no progress is possible anymore. So I do understand your point ^^
I am currently working on a better upgrade system with more diverse upgrades, more than one way to gain level ups (not tied to speed), and more impact of each upgrade :)