This is the problem with people not used to analyzing data, they don't know what they're seeing. A drop in Instagram users does not imply a link to the policy issue, correlation does not equal causation.
There may be connection, but you can't prove it by looking at raw numbers alone. A much more reasonable explanation was that, heaven forbid, some people actually stopped using Instagram or their phones entirely for a few days over Christmas.
In fact, data for other apps showed a very similar trend. But a story about people not using Instagram and enjoying their time with the family isn't as spectacular as one where user outrage leads to a massive drop in usage.
This alone wouldn't be much of a problem, but Facebook stock price actually dropped three percent as a result, since slow news days apply to the likes of Bloomberg or the Wall Street Journal, which picked up on the story.
Stock price has recovered since then, but it once again shows how impressionable "investors" really are. It's clear that some people actually lost money as a result of the story. While you could argue that it's their fault for being so gullible, it's not only that.
Facebook has been cursed with really fickle investors it seems as the slightest irritation sends stock prices down or, rarer, up.