Yes, the admin on your instance can read everything you have ever posted to Mastodon on their instance. There are no controls, and can be only minimal controls really, due to the nature of "person who runs the infrastructure has supreme power over it"
I guess people are freaking out more about it now because it's much more personal? Like you can know your admin on a 1:1 level, so it's less "faceless capitalist parasite can read my stuff" and more "my neighbour can read my stuff"
So if your threat model includes "People who run the infrastructure are my adversary" then you need to ... not put that kind of stuff on a public service.
Use something like Signal which builds in "admins can't view the content".
Instead of thinking of it as "omg admins can invade my privacy"
think about it in terms of your threat model. Why is this a threat? What will result from your adversaries having this power?
Use that to shape what content you share.
No space on the Mastodon fediverse will be safe for content that falls into "adversaries that have access to this are part of my threat model"
The only way this can actually be safe is if you run an isolated instance for yourself and your friends, and you hope that your friends don't leak it.
a metafictional persona