KAITO token price dropped as much as 24% on Friday after the development team at Kaito revealed they would be ending their Yaps program. It has dropped below a key descending trendline, making it vulnerable to more losses ahead.

In a Jan. 15 X post, Yu Hu, founder of crypto analytics platform Kaito, announced that the project will be ending its Yaps product and incentivized leaderboards in a bid to comply with policy changes at X, which recently implemented a ban on applications that reward users for posting content.

“After discussions with X, it’s agreed that a fully permissionless distribution system is no longer viable, nor aligned with the needs of high-quality brands, serious content creators, or X as a platform,” noted Hu.

The KAITO (KAITO) token fell nearly 21% within the first hour and subsequently settled at approximately $0.54 at press time, down about 24% from the time the news broke.

Hu’s announcement came shortly after X’s head of product, Nikita Bier, noted that the company has revised its policies to prohibit applications that incentivize users for posting. Bier cited a surge in AI-generated spam and reply slop, which led to this resolution.

The policy change targeted Information Finance (InfoFi) platforms such as Kaito that gamified user engagement through X’s API and distributed crypto rewards based on social interactions.

Crypto sleuth ZachXBT noted the policy change had affected nearly 157k members from the Kaito Yapper community who were banned following the crackdown.

For the uninitiated, Yaps was a product from Kaito where users earned Yap points and KAITO tokens for posting tweets about brands or projects. However, as more users joined the ecosystem, it led to a significant rise in AI-generated content and automated spam.

Following the sunset of Yaps, Kaito will replace it with Kaito Studio, a more selective, tier-based marketing platform that will expand its reach to other social channels, including YouTube and TikTok.

KAITO price analysis

On the 4-hour chart, KAITO has lost a key descending trendline that had been acting as a critical support level since late December last year. A drop below this trendline suggests bearish momentum could likely continue to weigh on the price in the short term. 

Technical indicators such as the MACD and Chaikin Money Flow index also seem to support the bearish bias. 

The MACD lines recently confirmed a bearish crossover and were steeply trending downwards, which is a sign that sell-side pressure was increasing. The Chaikin Money Flow index, which shows the net flow of money into or out of the asset, also came out with a negative reading.

Hence, it’s likely that KAITO will continue to decline towards its December low of $0.47 before bulls attempt any potential recovery.

However, if the KAITO price manages to rebound and move back above the $0.60 psychological level, it could potentially end its current downtrend.