The Bolton manager told Sky Sports News: "At the end of the day Jacob wanted to play matches and I just felt that I couldn't guarantee him games.
"He's got a call from Crystal Palace and he told me, he called me on the phone and he asked me. He was promised more games and I can't really run my team that way. I don't promise my players games.
"I promise my players that if they train hard and they commit to the team then they can play. Hence the reason Jacob left."
Butterfield could make his debut at Selhurst Park against Bolton in the Championship tomorrow.