This effect is a Trigger Effect that is activated by declaring a Level from 1 to 3. (This effect does not target.) The Level changed by this effect remains changed as long as this card remains face-up on the field.
If the activation of the "the Level of this card becomes that Level" effect is negated, then the "but you cannot Special Summon for the rest of this turn, except for a Synchro Summon using this card as a Synchro Material Monster." effect is not applied.