The SequelizeConnectionRefusedError occurs when Sequelize fails to connect to a PostgreSQL database due to incorrect configuration, server downtime, network issues, or authentication failures. It can also be caused by firewall restrictions, port conflicts, or database permission settings. Ensuring the database server is running, verifying credentials, and checking network connectivity can help resolve the issue. Proper PostgreSQL configuration, firewall rules, and Docker settings (if applicable) are essential for a stable connection.