In this paper, we present the results from a comprehensive study of nanosecond-scale implicit and explicit solvent molecular dynamics simulations of the wild-type telomerase RNA hairpin. The effects of various mutations on telomerase RNA dynamics are also investigated. Overall, we found that the human telomerase hairpin is a very flexible molecule. In particular, periodically the molecule exhibits dramatic structural fluctuations represented by the opening and closing of a non-canonical base-pair region. These structural deviations correspond to significant disruptions of the direct hydrogen bonding network in the helix, widening of the major groove of the hairpin structure, and causing several U and C nucleotides to protrude into the major groove from the helix permitting them to hydrogen bond with, for example, the P3 domain of the telomerase RNA. We suggest that these structural fluctuations expose a nucleation point for pseudoknot formation. We also found that mutations in the pentaloop and non-canonical region stabilize the hairpin. Moreover, our results show that the hairpin with dyskeratosis congenita mutations is more stable and less flexible than the wild-type hairpin due to base stacking in the pentaloop. The results from our molecular dynamics simulations are in agreement with experimental observations. In addition, they suggest a possible mechanism for pseudoknot formation based on the dynamics of the hairpin structure and also may explain the mutational aspects of dyskeratosis congenita.