He wasn't holding the team back, but he's not good enough for a serious playoff roster.
Tre seems to be like a great guy with high basketball IQ, but he's too limited physically. And he's not a reliable shooter. Death sentence in modern NBA.
He knows how to play defense, doesn't mess up his rotations, moves well laterally and stays with his matchups, but still gets torched because he's just too small.
He was on an expiring contract and if Spurs had no intention to move CP3, he became redundant. It was either him or CP3, definitely no room for both.