Don't know how the cap knows but it seems to. Playing with the cap off in a multi right now. I think the creators were thinking about keeping the game challenging. In our multi, we are all 21-26 level characters and we are playing on insane to make it challenging. Hasn't been terribly so with the exception of a few fights. We did this because we all wanted something a little different for the multi. I play my solos "clean."
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Order of the Holy Flame
Member of Clan HADB