Crowded environments inside cells exert significant effects on protein structure, stability, and function, but their effects on (pre)folding dynamics and kinetics, especially at molecular levels, remain ill-understood. Here, we examine the latter for, as an initial candidate, a small de novo β-hairpin using extensive all-atom molecular dynamics simulations for crowder volume fractions ϕ up to 40%. We find that crowding does not introduce new folding intermediates or misfolded structures, although, as expected, it promotes compact structures and reduces the accessible conformational space. Furthermore, while hydrophobic-collapse-mediated folding is slightly enhanced, the turn-directed zipper mechanism (dominant in crowder-free situations) increases many-fold, becoming even more dominant. Interestingly, ϕ influences the stability of the folding intermediates (FI1 and FI2) in an apparently counterintuitive manner, which can be understood only by considering specific intrachain interactions and intermediate (and hierarchical) structural transitions. For ϕ values <20%, native-turn formation is enhanced, and FI1, characterized by a hairpin structure but slightly mismatched hydrophobic contacts, increases in frequency, thus enhancing eventual folding. However, higher ϕ values impede native-turn formation, and FI2, which lacks native turns, re-emerges and increasingly acts as a kinetic trap. The change in the stability of these intermediates with ϕ strongly correlates with the hierarchical folding stages and their kinetics. The results show that crowding assists intermediate structural changes more by impeding backward transitions than by promoting forward transitions and that a delicate competition between reduction in configuration space and introduction of kinetic traps along the folding route is key to understanding folding kinetics under crowded conditions.