Is blender capable enough to model this? let's say I have a solid cylinder surrounded by a cloth like pipe. I want to bunch up the cloth to one end without it going inside the cylinder.



is there a way to make parts of the cloth move and collide with itself as parts underneath it moves up?
I'm assuming you want to do this dynamically.

Add a rigid body to your underlying object, add a cloth simulation to your outer pipe and enable self collision.

Now it's just a matter of adjusting the cloth simulation settings to get what you want.