It's possible, any admin can do anything they want, but it would be relatively rare. The way I've seen that play out is like if an instance pops up that seems like it's run by a Nazi but you can't really tell so you look at who their friends are. Usually it's like if the admin is interacting a lot with Nazi instances or content you can guess where their loyalties will lie. But a lot of instances simply won't block random small instances that haven't caused trouble yet, through nothing but being unaware.

Some communities want to be insular though, it's totally valid to want a "private forum" for let's say kids or religions or schools or a marginalized demographic. So they may block nearly everything for their own internal reasons.

My advice, don't hang out near Nazis and don't hang out in a place that doesn't make it clear that Nazis aren't welcome. Lemmy doesn't really have a lot of code of conduct stuff set up but that's the main thing to pay attention to.