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But still 200,000 BTC if dumped into exchanges and not private auctions could literally crash the market completely

But whoever puts and crash it is doing with a motive of buying similar at lesser price so the demand will again be there.

No, the thing is that the Mt Gox trustee who sold about 40000 BTC, did that to repay the debt that they had. Not for the purpose of buying at lesser.
This sudden crash of BTC on a major exchange triggered a panic selling in all market and we witness the latest bloodbath.