Kaito Token Plummets After X Bans InfoFi Projects Amid API Policy Shifts

X, formerly known as Twitter, has revoked API access for applications that reward users for posting on the platform, a move directly targeting the so-called 'infofi' model. The firm's product lead, Nikita Bier, stated that these practices had led to an influx of low-quality content, including AI-generated spam and repetitive replies according to reports. The decision, announced on January 16, is expected to reduce spam and improve overall user experience on the platform as data shows.

The Kaito token, central to the infofi ecosystem, dropped roughly 20% in a single day following the news. Kaito had been a major player in this space, offering token incentives for user engagement on X. The token now trades at more than 80% below its all-time high of $2.88 according to analysis. Other infofi projects also saw sharp declines, with Cookie DAO's token dropping over 15% as reported.

Kaito founder Yu Hu confirmed the company is sunsetting its Yaps program, which rewarded users for engagement, and transitioning to a new platform, Kaito Studio. The new model will focus on tier-based partnerships with creators and brands, rather than open, tokenized incentives according to company statements.

Why Did This Happen?

X cited a surge in low-quality and AI-generated content as the reason for the API changes. Bier described the content as a 'tremendous amount of AI slop and reply spam,' which degrades the user experience and undermines the value of genuine engagement according to reports. The policy shift aims to reduce spam by removing the financial incentives for bot-driven activity as analysts note.

X also provided a transition path for affected developers, offering assistance to move their projects to alternative platforms like Threads or Bluesky according to company announcements. The firm emphasized that this change is not a ban on infofi as a concept but a step to enforce higher quality content standards as stated.

How Did Markets React?

The crypto market responded rapidly to the news. Kaito's native token, KAITO, fell from approximately $0.70 to $0.57 in hours, a decline of over 17% according to data. Trading volume surged nearly 87% in the same period, suggesting forced repositioning among traders as reported. The broader infofi market also saw a significant drop, with the total market cap falling to around $359.5 million from $470 million in the prior week according to market analysis.

Cookie DAO and other infofi platforms followed similar trends, with COOKIE token prices dropping to $0.038 and LOUD tokens falling by 16%. The sell-off highlighted the sector's dependence on X's platform and API access as observed.

What Are Analysts Watching Next?

Analysts are now evaluating whether this policy shift signals a broader move toward tighter regulation of infofi and tokenized social platforms. Some argue that the decision could reshape the incentive structures of the crypto ecosystem, favoring more curated, platform-compliant models over open token rewards according to reports.

There are also questions about whether affected platforms can find alternative models or distribution channels outside of X. Kaito's pivot to Kaito Studio suggests a shift toward brand partnerships and tiered engagement rather than mass distribution as noted.

Investors are also monitoring the long-term effects on token valuation. The removal of unissued tokens from the HYPE token supply by Hyperliquid shows a similar trend, as crypto projects seek to align tokenomics with market perception according to analysis.

The move has sparked debate among crypto observers, with some welcoming the crackdown on spam while others worry about the centralization of social platform gatekeeping as reported. As infofi platforms adjust, the sector's resilience and adaptability will remain under close scrutiny.