We report on a first principles analysis of chemical decomposition reaction in a crystalline FOX-7 (1,1-diamino-2,2-dinitro-ethylene) molecule, which is a good candidate for insensitive energetic materials. Our calculations are based on variable-cell shape methods under pressure, density functional theory with localized numerical orbital and pseudopotential, together with ab initio biasing molecular dynamics. The calculated crystal structure and equation of state (pressure vs. volume) up to 8 GPa agrees well with the corresponding experimental data. A chemical decomposition by intermolecular hydrogen transfer is found at higher pressure. This decomposition appears to be driven by a weakening in the chemical hardness. This suggests that the molecular HOMO and LUMO orbital energy difference is decreased when intermolecular hydrogen transfers occur, and for the FOX-7 crystal the band gap is narrowed with increasing external pressure.