Above 1 means coins moving are, on average, being spent at a profit; below 1 means at a loss. The level tends to hover near 1 because sellers in aggregate are close to break-even, so the interesting information is in sustained deviations and in where the series finds support.
In bull phases SOPR repeatedly bounces off 1 from above, interpreted as holders declining to sell at a loss. In bear phases it rejects 1 from below. Variants strip coins moved within a few hours to remove exchange shuffling, and separate long-term from short-term holders.
Its weaknesses are the same as every cost-basis metric: internal transfers are misread as sales, wallet reorganisation creates noise, and the signal is descriptive rather than predictive. It tells you what sellers did, not what buyers will do.
Related: mvrv, realized-cap, coin-days-destroyed, supply-in-profit