I love this arc so much, ever since Shabondy Archipelago...
Luffy already had a huge 300 mil bounty, but with his crew taking on all of Thriller bark we definitely saw that they reached a new level of strength.
By associating Luffy with the eleven supernovas and putting him on a pedestal by allowing him to fight alongside Kidd and Law, he was given status as one of the strongest rookies to ever come from that side of Red Line. They had the government worried since there were so many 100 mil+ bounties there, which means Luffy's generation was proving itself.
Then Shakky tells them "Rayleigh is a thousand times stronger than all of you combined."
The straw hats, as well as Kidd and Law, are able to pick off marines like ants but get decimated by Kuma/PX robots, Kizaru, and Sentoumaru. Sentoumaru, some weird fat dude who nobody knows, makes Luffy look like trash.
Luffy is separated from his crew and begins his journey to save Ace. He is thrown onto an island where any other man would've surely died, and his power to befriend just about anybody takes over. A shichibukai falls in love with him.
He infiltrates the Impel Down, which is basically hell, causes a ruckus, and ends up finding allies on every level. Every time we thought he would die, he didn't, including when he got absolutely wrecked by Magellan. By this time, we've come to realize that despite taking down two Shichibukai and conquering Enies Lobby with a single crew, Luffy is still a CHUMP compared to the real bosses of the World government. However, this is when we started to see what his "true" power is.
Just before his escape, he meets his rival, who once again speaks of Fate. Blackbeard, the most menacing and relentless yet the most charismatic villain in One Piece, is wrecked effortlessly by Magellan. This sorta showed that Luffy and Blackbeard may be at different levels, but they both still have a long way to go.
With the help of new allies, Luffy escapes. Zoro, Nami, Usopp, Sanji, Chopper, Robin, Franky, and Brook temporarily became Buggy, Mr. 3, Mr. 2 Bon Clay, Daz Bones, Inazuma, Ivankov, Crocodile, and Jimbei.
A little later, Blackbeard also escapes Magellan with new allies. Though Luffy's allies just sorta banded together with no intent to stay together, Blackbeard recruited from the depths of hell and created a crew that now has even more people than the Straw Hats.
They make it to the battle... more names, faces, and status. Whitebeard, Marco, Jaws, Oars Jr., Vista, and more. Sengoku, Garp, Kizaru, Aokiji, Akainu. All current and former shichibukai. Kuma was already unbeatable, but now there's a army of them. Luffy's status just gets smaller and smaller, and getting wrecked in battle just adds injury to insult.
Of all people, Luffy gets defeated by Vice Admiral Momonga and a couple nameless Zoans. He still can't even beat Smoker. Though it was heroic for him to face the 3 admirals, his attack does absolutely nothing.
Amidst the battle, Mihawk makes it apparent that Luffy's "true" power is to 'become allies with anyone he meets.' There is absolutely no way Luffy could have done it alone, and in fact, this is how it has worked in every arc. He needed his crew to defeat who he defeated. They all provided essential support, and he did what he set out to do. "Which one of you is Arlong?!" "So all I have to do is kick Crocodile's *** and everything will be fine, right?" "SAY YOU WANT TO LIVE!" "I'm definitely going to save Ace."
Luffy, the determined chump with infinite allies, is able to save Ace with sheer will power. Luffy never fails in what he says he'll do, but suddenly it all goes to waste as Akainu kills Ace. Ace, the brother he went to hell and back and almost to hell again for, dies in his arms.
And then Blackbeard appears unscathed and literally on top of the world.
This is such a brilliant setup for their rivalry. This is just the beginning.