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My advice would be to let the market set itself. Don't respond to the ridiculous demand in the first place; let him hit free agency. His free agency demand might be more reasonable right away, but if it's not, check what he's asking for each day; at some point, he'll receive an offer from another team and you'll see the dialogue switch to something like, "I've gotten an offer from another team but I'm still willing to listen to you," and his demand will have dropped to something above but close to the offer from the other team, which should be more reasonable than the original ridiculous offer.
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