Oh no, that's not even the half of it. The admin for your instance has access to literally anything on their server, including passwords afaik. If you want privacy, this ain't it chief.
They have access to your password hash, effectively the "infrastructure" admin(s) as I'll call it (not admins of the site - they need to have access to the actual system that is running the instance) have access to the same things that infrastructure admins of another site would have.
Nobody has access to passwords. They have access to password hashes, which are not the same thing. It would be the absolute most half baked of solutions to still be saving passwords in cleartext.
Which isn't to say it doesn't happen. I still occasionally get my password emailed back to me from small handbuilt websites. Which is part of why you should at the very least never use the same password twice.
Unless, you know, they sniff it during registration or login. Or modify the lemmy server to store them unhashed. You are absolutely trusting the server owners not to do any of that, and if you use a password you've used elsewhere you need to change it everywhere.