The Trotters had reportedly agreed a deal to sign the 26-year-old, who is available on a free transfer.
However, the Scot has now revealed that negotiations hit a brick wall once they were presented with the player's wage demands.
"He's a player we enquired about a couple of months ago, and in between that, I was on holiday and Phil [Gartside] did meet with his representatives," Coyle told the Bolton News. "At that point they thought they were close to a deal and then their demands changed.
"Again last week I had another email to say he was coming over, and to be fair, I think he did manage to get into the country but the next email with the demands was absolutely ridiculous.
"There was no point meeting with the player because of the demands they had put forward. They were far and away beyond our means, and I've got to say, they would be out of the reach of a lot of top six clubs as well."
Sanchez, who has 25 caps for his country, has spent the last five years with French side Valenciennes.