X revoked InfoFi API permissions, causing a significant drop in KAITO, and the social crypto model faced structural shocks

Platform Policy Changes

On January 15, 2026, X (formerly Twitter) made substantial adjustments to its developer API policy, explicitly revoking API access for applications that incentivize users to post or interact through tokens. Such projects are commonly referred to as "InfoFi" in the crypto space. Nikita Bier, head of X products, stated in a public statement that this move aims to curb the growing phenomenon of "AI spam content and reply flooding" on the platform—where incentive-based posting mechanisms have amplified low-quality, automated content in a short period, significantly harming user experience.

This initiative is not an isolated event but part of X's ongoing tightening of API governance strategies under the current management. Historical experience shows that whether it was the large-scale termination of third-party client support in 2023 or the subsequent restructuring of API access levels, X has been gradually prioritizing platform stability and content quality over an open developer ecosystem, a governance path that repeatedly reshapes the external products and business models built around it.

Event Overview

As one of the most representative projects in the InfoFi space, KAITO was directly impacted by this policy change. The project team promptly announced the shutdown of the Yaps incentive system and related leaderboards—features that heavily relied on X's API data—and simultaneously launched a strategic transformation plan, introducing a new product, Kaito Studio, which shifts focus to a content and marketing platform centered around brand partnerships and selected creators, with plans to cover various content channels, including YouTube and TikTok, to reduce dependence on a single platform.

Market reactions were swift and severe. According to CoinGecko data, KAITO's price dropped from approximately $0.67 on January 14 to a range of $0.57–$0.54 on January 15 after the policy confirmation, representing a decline of about 15%–20% within 24 hours. Meanwhile, trading volume surged significantly, indicating that the market was not passively declining but that investors were actively adjusting their positions and reassessing project risks.

Similar fluctuations were observed in other InfoFi-related assets. For instance, the COOKIE token of Cookie DAO dropped over 14% within the same time frame, with trading volume nearly doubling, showing that the risks in this sector are being reassessed as a whole rather than being limited to a single project.

Why This Change Matters

The impact of X revoking API access extends far beyond short-term price fluctuations; fundamentally, it reveals a long-standing structural dependency risk inherent in InfoFi projects. The core economic model of such protocols often relies on data streams, interaction metrics, and content distribution mechanisms provided by third-party social platforms, which are then converted into on-chain value through token incentives.

Once these upstream data sources are restricted or shut down, the feedback loop that originally drove trading activity and token demand may instantly fail. This sharply contrasts InfoFi with traditional DeFi projects: the latter relies on on-chain liquidity and the deterministic execution of smart contracts, while the former is highly dependent on permissioned social APIs and proprietary algorithmic systems.

The Inherent Contradiction of Data Flow and Economic Mechanisms

The reason InfoFi models attracted capital attention early on was that they seemingly could transform "attention" and "information output" into tradable economic assets. However, multiple analyses have pointed out that such incentive mechanisms are more likely to maximize content quantity rather than information quality.

Several media outlets have cited platform-side data indicating that after the launch of incentive-based posting, the proportion of automated scripts and AI-generated content significantly increased, producing millions of low-value interactions in a short time. This is precisely the "AI slop" problem referred to by X's management and the direct background for their decision to tighten API access.

Ironically, these incentive mechanisms that once drove user growth and token activity for projects like KAITO have now become targets for platform governance that need to be suppressed.

Market-Level Impact

KAITO's price performance reflects the market's repricing of the risk structure in this sector. Currently, KAITO's price has dropped over 80% from its historical high of about $2.88 in February 2025, indicating that investors are no longer willing to pay a premium for the narrative of "social interaction equals value."

At the same time, some trading platforms reported that KAITO's trading volume surged by over 100% after the announcement, and this "volume spike decline" aligns more with the characteristics of being forced to reconfigure risk exposure rather than simple emotional selling, further indicating that the market views this event as a structural change.

Ecological Chain Reaction

The impact did not stop with KAITO. Cookie DAO and other InfoFi-related projects quickly suspended similar incentive activities and emphasized a focus on more compliant and sustainable data products and analytical services. This synchronized contraction reinforced the market consensus: the issue is not an isolated incident but rather the systemic vulnerability of the entire InfoFi model in the face of platform governance.

When multiple projects rely on the same centralized platform rules to support their token economies, a single policy adjustment is enough to trigger a chain reaction across the entire niche sector.

Project Response Strategies

The launch of Kaito Studio by KAITO represents a possible self-rescue direction: shifting from "reward-driven content output" to "brand and creator-oriented high-quality collaborations," and proactively diversifying across multiple content platforms to reduce dependence on a single API.

This path aligns with the broader trend in the creator economy, which seeks to establish more robust business relationships between on-chain and off-chain ecosystems. However, this transformation also implies higher execution costs, slower growth rates, and a redefinition of token value narratives, the effectiveness of which remains to be validated over time.

Broader Context

X's tightening of API access also occurs against the backdrop of increasing regulatory scrutiny on AI content and information quality by global tech platforms. For social platforms, the trade-offs between openness, commercialization, and user experience are becoming increasingly acute; while in the crypto space, the volatility of InfoFi serves as a reminder to the market: even if incentive logic is on-chain, upstream information flows and distribution rights may still be highly centralized.

Conclusion

X's adjustment of API policies not only impacted KAITO's short-term price but also exposed the structural shortcomings of InfoFi as a sector. The significant token retracement, surge in trading volume, and collective pivot of project teams reflect the market's reassessment of the sustainability and risk resilience of this model.

If future social crypto projects wish to avoid repeating past mistakes, their design focus will have to shift from "how to incentivize more content" to "how to continuously produce credible, scarce, and valuable information without relying on a single platform."

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