What is Makara? The world’s first crypto robo-advisor.

Makara is the first ever robo advisor ( technology platform that automatically invests money in assets based on data from the markets and algorithms that predict up and down turns.) It is registered with the SEC so it’s got the regulatory green light to offer and launched in June 2021 to 20,000 users. The service is now live for US based retail investors above the age of 18.

The service was founded by Sadie Raney who is also the CEO of crypto hedge fund Strix Leviathan which was only for accredited investors. Makara is basically democratizing access to crypto style hedge funds like Strix Leviathan.

How does Makara work?

Makara’s aim is to simplify the process of investing in crypto with two prongs. The first education on the crypto market and the second investing through so called thematic baskets. The investor allocates their portfolio to one or all baskets and they own the underlying assets in their own segregated basket, unlike a crypto ETF which wouldn’t give investors real exposure to the underlying asset. The way Makara helps you allocate your funds is with a questionnaire to assess your financial goals and risk tolerance.

Makara has built an algorithm to “identify repeated patterns” in the market to “provide a better risk-adjusted return” instead of the old school HODL technique.

The first basket is the “Blue Chip ” basket which is the ten largest cryptos by market capitalization that Makara recommends. For example Dogecoin is not in their top 10, given the hype value of Doge and the likely eventual downfall of the currency. The basket equally distributes your capital across all ten assets and makes quarterly adjustments.

The second basket is the “DeFi” basket which invests in more speculative cryptos that are providing traditional style financial products. For example these cryptos offer loans, savings or exchanges without a centralised bank or lender, basically no middle man. They current basket invests in the following: Loopring, Injective, Synthetix, 0x, Aave, Sushi, Uniswap, Maker, Chainlink, Bancor, Uma, Compound, 1inch, Kyber Network, Balancer, Curve, Yearn.finance and BarnBridge. It’s also rebalanced quarterly and investors get equal exposure to all assets.

The third basket is the “inflation hedge” basket which is invested 57.2% into BTC and 42.8% into PAX Gold. It’s also rebalanced quarterly.

The fourth basket is called the “Universe” basket which is invested in “ every sector, including currencies, non-fungible tokens, and decentralized finance.” The assets are: Bitcoin (16.6%), Ethereum (12.3%), Litecoin (10.3%), Zcash (9.0%), Bitcoin Cash (8.9%), 0x (4.0%), The Sandbox (2.7%),Basic Attention Token (2.5%), Orchid (2.1%), Enjin (1.8%), Chainlink (1.7%), Sushi (1.5%), Storj (1.5%), Decentraland (1.5%), Ren (1.5%), Synthetix (1.4%), Loopring (1.3%), Injective (1.3%), Uma (1.2%), Compound (1.2%), Aave (1.2%), Filecoin (1.2%), Bancor (1.1%), Balancer (1.1%), Uniswap (1.1%), Kyber Network (1.1%), The Graph (1.1%), Skale (1.1%), Curve (1.0%), Matic (1.0%), Maker (1.0%), 1inch (0.9%), Yearn.finance (0.8%), Amp (0.8%), BarnBridge (0.7%) and Livepeer (0.6%). They’re allocated based on a risk parity weighted allocation and are rebalanced quarterly.

They also have baskets solely dedicated to BTC and ETH.

Makara charges a 1% management fee and a flat annual fee from $25-75 which changes based on the size of your portfolio.

Does Makara use tether?

A Business Insider article quotes Raney “If we utilize a stablecoin, we do not use tether, [although] we have in the past,” said Raney, whose company now uses Gemini. “The regulatory uncertainty with tether was what kept us from continuing to use it.”

Why does crypto need robo-advisors?

Crypto is in dire need of services like this for a few reasons. The first is that the markets are open 24/7 and thus hard to stay on constant track of. Robo advisors are great for investors who don’t have the time to manage investments or talk with advisor. They’re also great for people who don’t have a lot of money to invest and like the possibly to manage their crypto investments on their phone. The crypto market is much harder to predict that than the traditional markets and the metrics (you’d use to value a traditional company) aren’t in play so having help from a robo advisor is advisable.

Investing in crypto is also quite hard for the average investor given the need to sign up to multiple exchanges and then store assets in cold storage.

The bottom line:

Makara is a fantastic way for the average person to get broad exposure to blockchain and crypto as an industry. The returns so far have been impressive and it’s a hands off way to invest if you don’t have time or energy to spend the time to invest yourself.

One of Makara’s investors: Ascend VC’s founder Kirby Winfield put it this way “We believe that as cryptocurrency matures as an asset class, a purpose-built financial ecosystem will emerge that mirrors the one supporting the equity/fiat investment markets.” That’s what Makara has set out to do and I’m betting we’ll see copycats spring up in different markets as regulation becomes more mature.