Do Crypto Investors Need a Robo-Advisor? This Startup Bets They Do

More than a decade ago, startups like Betterment and Wealthfront launched "robo-advisors" as a low-cost way for retail customers to pursue professional strategies. Today, financial companies of all stripes offer robo-advisor services, which use algorithms to select a rotating blend of assets like stocks and bonds.

Now, as cryptocurrency markets expand, a startup called Makara is launching the first SEC-registered robo-advisor focused on crypto. On Tuesday, the startup announced would-be customers can sign-up for its waitlist ahead of the product's formal launch later this spring.

In an interview with Decrypt, president and CTO Matt Kern said Makara initially plans to offer seven "baskets" composed of different cryptocurrencies, which the company will rebalance every few months in response to market conditions.

One such basket, said Kern, will be branded as an inflation hedge and contain a handful of cryptocurrencies along with a Paxos token tied to the price of gold. Other baskets consist of a more exotic mix of crypto assets, including one Kern described as "DeFi-focused."

According to Makara, the time is right for a crypto robo-advisor given that many investors are struggling to keep up with a proliferation of new tokens hitting the markets. By relying on the company's algorithms, those investors can rely on what amounts to professional advice in selecting the right mix of assets.

Makara is relying on the crypto exchange Gemini to power its banking, custody and other backend operations. This will likely provide reassurance for customers who may be uneasy entrusting their investments to a startup, but it also means the selection of assets Makara provides will be restricted to those Gemini has chosen to offer.

As for Makara's investment strategies, the company is a spin-off from a hedge fund called Strix Leviathan, backed in part by NFL legend Joe Montana, that developed its own crypto trading software. This relationship means that Makara's investment choices will be informed by the fund's software—and that retail investors will, to a degree at least, get exposure to the same sort of strategies used by hedge funds.

For some investors, Makara may offer a convenient way to navigate what can be a bewildering mix of crypto investments. Its robo-advice comes at a cost, though: Makara plans to charge a 1% management fee plus an annual fee that ranges from $25 to $75 depending on the size of the investor's portfolio. This is significantly higher than conventional robo-advisors, whose fee is typically around 0.25%. Kern noted, however, that Makara intends to waive all these fees for new customers.

At the outset, Makara will only be available on iOS devices, though the company says it will soon add capacity for Android. And down the road, Kern says Makara may consider licensing its software to other platforms.