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The lack of liquidity is what would push the price down, since demand is higher at lower prices.

Yes, that is generally how markets work. However there is no central exchange for bitcoin, nor is there enough liquidity in any single exchange. So, the seller would need to open accounts in multiple exchanges and sell in all of them. Sure, bringing down one exchange could have consequences for price, but it wouldn't cover this large of an amount of BTC. Plus, half the exchanges with enough liquidity to even begin with, aren't even allowed to be used in the US.

Again, that's not how the US govt works with these things anyway (OTC auctions), so it is all a moot point.

There absolutely are HFTs running off arbitrage on the major exchanges, so you wouldn't need to hit many, just a couple major ones.

We are talking about theoretically crashing the market, not an auction, and illiquidity won't protect it.

Ok, so someone buys the bitcoin at auction for pennies on the dollar, turns around and undercuts every other seller out there.

It is an auction, it won't be pennies on the dollar.

The last person who got that good of a deal was Tim Draper in 2014, which was a brilliant play and even then, I doubt he's sold it all.

https://www.cnbc.com/2021/12/19/what-the-us-government-does-...

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