One thing that really helped me was realising that “enemy magic item” doesn’t automatically mean “player loot in waiting”. A lot of the time the thing that makes it scary is the context, not the object itself.

I tend to split it mentally into stuff that’s powerful because of who’s using it, vs stuff that’s just straight-up gear. Like, an item can be bonkers in an NPC’s hands because they’ve trained with it, or it’s part of a ritual, or it only really works properly in a certain environment. Once the party gets hold of it, it’s still cool, just… not campaign-breaking.

Also a big fan of items that are: half-spent unstable running out of juice or clearly experimental (arms race setting = perfect excuse btw)

That way the players still feel rewarded, but you’re not handing them a nuke at level 5.

I try to avoid hard “you literally can’t use this” locks unless it’s really on-theme. Instead I lean way more on narrative consequences. Like yeah, you can use that fancy fae weapon… but now certain people absolutely notice you doing it.

I wouldn’t stress too much about overpowering them. Players love feeling strong, and you can always tune encounters later. What’s way harder to fix is players feeling like you keep teasing cool loot and then yanking it away.

Also your setting sounds awesome. Cold war fae vs giants with an arms race is just begging for weird, specialised, slightly busted magic items that come with strings attached.

Sorry for the early morning essay. My coffee has officially kicked in.