Platform X slashes "manure removal," InfoFi narrative collapses: KAITO drops 20% in a single day

One of the world’s largest social media platforms, X, has carried out a “surgical” and precise crackdown on its developer API policies, explicitly banning applications from rewarding users for posting on the platform. This move directly targets the core of the crypto narrative known as “InfoFi.”

Leading projects relying on this model, such as Kaito’s token KAITO, plummeted nearly 20% in response, while similar tokens like COOKIE from Cookie DAO also suffered synchronized heavy declines. X’s product lead openly stated that this move aims to eliminate “AI spam” and reply spam generated by incentivized content, thereby improving platform content quality. This sudden regulatory storm has not only caused the market value of related tokens to evaporate but also forced platforms like Kaito and Cookie to urgently shut down their core incentive functions and seek transformation. The incident exposes the significant policy risks inherent in building crypto business models on a single centralized platform and serves as a wake-up call for the entire crypto industry’s over-reliance on social data and attention economy.

A Precise Strike Against “AI Spam”: X Platform API Policy Sparks Crypto Market Turmoil

The story didn’t originate from internal crypto industry turmoil but from a product decision by a traditional social media giant. Recently, X’s product lead Nikita Bier publicly announced that the company is revising its developer API rules, explicitly prohibiting applications that incentivize users to post on X. Bier’s explanation was straightforward and sharp: such economic incentives have led to大量低质量回复、自动化帖子以及他称之为“AI slop”的内容，严重损害了平台用户的整体体验。

This policy adjustment quickly evolved from a product announcement into a financial earthquake sweeping through certain crypto sectors. The reason lies in the “InfoFi” narrative that emerged over the past year or two, whose business model is almost entirely built on mining and incentivizing data from the X platform. InfoFi, or Information Finance, aims to financialize social media information streams, influence, and attention. Platforms like Kaito, by aggregating posts from key opinion leaders in the crypto space on X to analyze market trends and narratives, and designing sophisticated token incentive systems to reward content creation and engagement, have created buzz for partner projects.

Therefore, while X’s new policy did not explicitly ban the “InfoFi” category, its core clause of “prohibiting rewards for posting” effectively cuts off the oxygen these projects rely on. API access was immediately revoked, meaning these applications could no longer operate their incentive engines normally. The market’s reaction was swift and brutal; investors immediately recognized this as a structural threat to the InfoFi business model, not just a short-term policy fluctuation. A sell-off wave erupted within hours of the announcement, plunging the prices of related tokens into deep lows.

KAITO and Other Tokens Plunge: Market Votes with Its Feet, Liquidity Risks Emerge

The reaction of capital markets is always the most honest and rapid. Under the impact of X’s new policy, a collective sell-off hit the entire set of tokens associated with the InfoFi concept, with Kaito’s KAITO suffering the most severe decline. Data shows that KAITO’s price dropped sharply from about $0.70 to around $0.57 in a short period, a 17%-20% decrease in a single day. Even more telling, its trading volume surged by nearly 87% on the day of the crash, reaching over $121 million.

This “price down, volume up” typical market feature clearly indicates that this is not a slow decline due to liquidity shortage but a large-scale, organized capital flight. Holders—both retail and institutional—are reassessing their risk exposure and voting with their feet, fleeing this suddenly uncertain sector. KAITO’s current price has fallen more than 80% from its all-time high of $2.88, telling a full story of a cycle from frenzy to disillusionment.

Following KAITO, other InfoFi tokens also suffered. COOKIE, the governance token of Cookie DAO, fell over 20% within 24 hours, dropping to about $0.038, with trading volume also increasing significantly. Market panic showed clear contagion effects, with tokens like BubbledMaps, Loud, Arbus, and others experiencing double-digit percentage declines. The depth and breadth of this sell-off reveal the fragility of the InfoFi narrative after losing X as its core “means of production” and “distribution channel.” Investors are finally confronting a fundamental question: if the core activity (rewarded posting) is deemed harmful to the platform, what is the long-term value support for its tokens?

Overview of Core Data and Market Impact of the InfoFi Storm

Policy issuer: X Platform (formerly Twitter)

Immediate trigger: Revising developer API rules to ban applications rewarding users for posting

Core affected model: InfoFi (Information Finance)—using tokens to incentivize content creation and interaction on social platforms

Responses from leading projects:

• Kaito: announced closure of “Yaps” incentive leaderboard, transitioning to Kaito Studio (cross-platform layered marketing services).
• Cookie DAO: terminated “Snaps” creator incentive program, retaining enterprise API data services.

Immediate market reaction:

• KAITO token: dropped 17%-20% in one day, trading volume surged 87% to over $121 million, down more than 80% from its high.
• COOKIE token: fell over 20% in 24 hours, with significant increase in trading volume.

Industry ripple effects: BubbledMaps, Loud, Arbus, and several other InfoFi concept tokens also experienced sharp declines.

Kaito and Cookie’s Emergency Transition: From “Incentive Farms” to “Compliance Service Providers”

Faced with survival crisis, top InfoFi projects did not sit idly but quickly launched difficult transformations. Their responses provide excellent case studies of startup resilience under extreme pressure.

Kaito founder Yu Hu responded swiftly after the policy announcement, announcing the company would shut down its core “Yaps” incentive system and public leaderboard. Instead, it launched a new platform called “Kaito Studio.” According to descriptions, Kaito Studio will no longer be a public, token-driven content farm but a more selective, tiered marketing platform. It aims to provide cross-platform (including X, YouTube, TikTok, etc.) targeted campaign services for brands. Hu explained this transformation as “aligning with X’s policy,” also fitting the trend of brands favoring precise marketing over broad distribution. Essentially, this is a retreat from a potentially red-line touching, aggressive “user incentive protocol” to a more traditional, compliant “B2B data and marketing service provider.”

Similarly, Cookie DAO issued a comparable announcement. After discussions with X, Cookie decided to shut down its “Snaps” creator incentive activity. The project emphasized that they remain a client of X’s enterprise API, and their underlying data analysis business will continue, but reward-based posting projects can no longer operate under the new rules. Another affected project, Xeet, announced a pause on all incentives, evaluating subsequent steps and handling pending rewards.

These transformation statements send two key signals. First, the project teams acknowledge that the previous simple “posting as mining” model has reached its end on major platforms; stubbornly sticking to it would lead to total exclusion. Second, they attempt to “separate the baby” (valuable data analysis or community insights) from the “bathwater” (problematic incentive models), retaining core data services while stripping or radically transforming the rule-breaking incentive layers. Whether this transformation can succeed depends on whether their B2B services can generate enough revenue to support their market value and community expectations—this remains a huge unknown.

The Fundamental Flaws of InfoFi and the Inevitable End of the “AI Spam” Economy

If we look beyond short-term price fluctuations and examine the core of the InfoFi model, we may find that X’s crackdown is perhaps just accelerating the collapse of an internal contradiction. The original idea of InfoFi might have been noble: rewarding valuable information discovery and sharing, tokenizing social influence. But human nature’s profit-seeking and automation capabilities quickly distort it into an unsustainable “attention extraction game.”

Its fundamental flaw lies in the paradox between incentives and content quality. When rewards are strongly tied to posting volume and interaction metrics (likes, replies), the optimal strategy ceases to be producing in-depth, unique content, and instead focuses on maximizing output frequency and stimulating engagement. This results in two major consequences: first, a flood of homogeneous, low-information content filling timelines; second, the rise of professional “interaction farms” and AI-powered bots generating “correct nonsense” en masse. Kaito’s Yaps system, especially after attracting hundreds of thousands of users in Korea, saw its leaderboard gradually dominated by these automated or semi-automated “mining” accounts, drowning out genuine research and discussion. This is the root cause of what X’s product lead called “AI slop.”

Furthermore, the token economics of these projects also sow seeds of trust crisis. Take KAITO as an example: its token issuance in early 2025 triggered a strong rebound, as users found that the tokens earned through Yaps points were far below expectations. Additionally, the tokenomics was criticized for being overly tilted toward insiders, with team and early investors quickly dumping after airdrops, putting continued pressure on the price. These behaviors damaged community trust, turning the incentive system into a “pump-and-dump” trap rather than a “co-creation” mechanism.

Therefore, X’s policy change was not an unpredictable “black swan” but a cleanup of an economic model with serious negative externalities. Many crypto traders and content creators welcomed this, believing that such incentive farming had severely hollowed out the organic, spontaneous discussion atmosphere of crypto. This event forces the industry to reflect: what is the long-term value of financialization built on manipulation and attention extraction?

The “Centralization Dependency” in Crypto: The Urgency and Challenges of Decentralized Social

X’s “sword-wielding” has far-reaching implications beyond the InfoFi sector. It exposes a profound paradox in current crypto and Web3 visions: we aim to build a decentralized future, yet our social layer, traffic entry points, and narrative fermentation rely heavily on centralized Web2 super platforms like X.

This dependency constitutes a huge single point of failure risk. X has absolute control, capable of reshaping or destroying the business models built on it overnight through algorithm adjustments, content moderation, or API policy changes. Automated moderation tools and AI-driven detection make it an incredibly powerful “gatekeeper.” For any crypto project built on such a platform, this is an systemic risk that cannot be hedged.

This crisis intensifies discussions about alternatives. Decentralized social protocols like Farcaster, Lens Protocol, and Bluesky’s AT Protocol are back on the agenda. These protocols aim to return ownership of social identities and data to users, avoiding dependence on a single company’s whims. Additionally, multi-platform strategies are becoming a practical choice, as Kaito Studio’s plan to distribute services across X, YouTube, TikTok, and others reduces reliance on any single channel.

However, challenges remain significant. Decentralized social networks are still in early adoption stages, with user bases, content density, and network effects far below giants like X. For crypto projects relying on broad exposure and traffic, leaving the main battlefield could mean losing their most important audience. This creates an awkward dilemma: knowing the risks, but still unable to detach.

This InfoFi storm may be a turning point, forcing builders to seriously consider how to reduce dependence on centralized platforms—either by supporting decentralized alternatives or building more resilient, cross-platform architectures. In the long run, a truly robust Web3 ecosystem cannot forever depend on the veins of Web2. The pain from this event might be a necessary catalyst for industry progress toward more independent, decentralized social infrastructure. For investors, it’s a profound lesson: when evaluating crypto projects related to social data or attention economy, the dependency risk on centralized platforms must be a high-weight factor.