Holding believed his position was under threat after Mikel Arteta signed centre-backs Gabriel and Pablo Mari in the summer.
Instead, the 25-year-old has became a favourite of the manager and was rewarded with a new contract this week which will keep him at the club until 2024.
"We signed two centre-halves over the summer and I was thinking, 'am I even going to be involved in this?'" Holding told The Telegraph. "At 25, I have to focus on playing. I spoke to the manager and said there was a loan opportunity that had come up, that I needed football. After my injury [a ruptured anterior cruciate ligament in December 2018] I needed a year to play.
"It was all agreed, and the club thought it would be the best move for me, but in the week before the Community Shield against Liverpool, [head coach Mikel Arteta] pulled me aside and said he wanted to check that I was focused for the weekend because I was needed.
"I told him that, wherever I am, I will always play my hardest and put 100 per cent in.
"I played the game, we did well and we won, and then on the Monday, he called me into his office. He said it made no sense to let me go if my end goal was to play here. He was saying I was going to play, that it was my shirt to lose. That was the confidence he put in me."