The 20-year-old winger will make his last Palace appearance before completing a £15m move to Manchester United.
Holloway said: “We feel we are losing a family member but without letting him go, I do not think I would have been doing Palace fans any favours at all.
“How would he feel if we had held him back and stopped that move? What would he have produced if we had been selfish and stood in his way? I think we will see him pay us back. We need him to play well because he is a huge part of what we do.
“With his talent, Wilf will learn to help Manchester United win games in the top flight. He needs to be left alone to play because his talent is so fresh and exciting.”