My maths is perfectly fine, thank you.
If each time I die I lose 25% of the xp needed to gain in level, then to gain a level I have to be able to re-gain at least that 25% xp before dying again.
If I can't manage that, then I'll never increase in level again. The maths is simple and straightforward.
With other forms of death penalty I can at least slowly crawl up to getting to higher level and therefore being able to buy perks that will help keep me alive, but with a cumulative direct xp loss I can't unless I can gain xp faster than I lose it.
Even if the penalty was "you only gain a tenth of the normal xp for the next hour" at least you'd still be gaining it slowly and it might take you ten times as long to go up levels but you wouldn't be able to get stuck in a vicious circle of losing it quicker than you re-gain it.