InfoFi tokens, a specialized category of crypto assets designed to incentivize the creation and sharing of information on social media platforms, are experiencing a severe downturn as of January 16, 2026. This downturn follows a major policy shift by X (formerly Twitter), which banned applications that reward users for engagement. This move has fundamentally disrupted the “Information Finance” model, causing double-digit price drops in leading assets like KAITO and COOKIE and forcing projects to rapidly pivot their business strategies.
Why X Banned InfoFi Apps and Revoked API Access
The catalyst for the market crash was an announcement made on January 15, 2026, by Nikita Bier, X’s head of product. The platform decided to revoke API access for apps that financially reward users for posting, citing a degradation in platform quality.
- •Combating AI Spam: X leadership identified that the InfoFi model inadvertently incentivized the mass production of low-quality content. Users were employing AI tools to generate “slop” and reply spam solely to farm token rewards, rather than contributing valuable discourse.
- •Policy Shift: To restore the integrity of user interactions, X implemented a strict ban on “apps that reward users for posting,” effectively cutting off the data pipeline that these Web3 platforms rely on to track engagement and distribute rewards.
The "InfoFi" Web3 Model
InfoFi (Information Finance) is a Web3 framework that attempts to tokenize user attention and data. Instead of social media platforms retaining all value from user content, InfoFi protocols aim to share revenue directly with creators.
- •Tokenized Engagement: Platforms like Kaito and Cookie DAO utilize this model to turn likes, retweets, and replies into monetizable assets.
- •Reward Mechanisms: Users are typically rewarded with native tokens (e.g., KAITO, COOKIE) for performing specific actions that boost visibility or engagement for the protocol.
- •Data Valuation: The core premise is that high-quality information and curation are valuable commodities that should have a liquid market price.
Impact on KAITO, COOKIE, and the Crypto Market
The market reaction to the announcement was immediate and severe, reflecting the sector’s heavy reliance on X’s infrastructure.
- •KAITO Price Plunge: Following the news, the KAITO token dropped approximately 20% within hours, trading down to around $0.57.
- •COOKIE Sell-Off: Similarly, COOKIE (associated with Cookie DAO) saw a decline of more than 20% in a 24-hour period.
- •Sector-Wide Loss: The total market value of the InfoFi sector contracted by over 10% in a single day, as investors panic-sold assets that no longer had a clear utility on their primary distribution platform.
- •Operational Disruption: Projects are now forced to rethink their existence. Kaito, for instance, has already signaled a pivot in its product strategy to survive without direct X API integration.
Frequently Asked Questions
Why did the price of InfoFi tokens like KAITO drop suddenly?
The price of InfoFi tokens crashed because their utility was tied directly to X’s API. When X announced a ban on apps that reward posting on January 15, 2026, investors realized these projects lost their primary mechanism for tracking user activity and distributing rewards, leading to an immediate sell-off.
What is the difference between SocialFi and InfoFi?
While both sectors merge social media with finance, SocialFi typically focuses on monetizing social influence and access (e.g., buying “keys” to chat with a creator). InfoFi specifically focuses on the tokenization of information itself, rewarding users for the act of curating, sharing, or generating content that the protocol deems valuable.
Will InfoFi projects survive the ban by X?
Survival depends on the ability to pivot. Projects like Kaito are already restructuring their products to reduce reliance on X’s API. However, the original model of simply “farming rewards for tweets” is likely dead; projects must now find new ways to verify value and engagement outside of X’s walled garden or move to decentralized social protocols like Farcaster.
Conclusion
The sudden crash of InfoFi tokens in early 2026 serves as a stark reminder of “platform risk” in the Web3 ecosystem. Building a decentralized economy on top of a centralized platform like X proved to be a fragile strategy. As the market digests the 20% price drops in assets like KAITO, the sector faces a critical “innovate or die” moment. Investors must now assess which teams can successfully decouple from Twitter’s infrastructure and build genuine, standalone value for information curation.