As compared to other mediums spacing plays a decisive factor in XR. Tightly spaced letters in XR cause significant legibility issues, they crowd and interfere with each other making it hard to recognise individual letters. Hence, it becomes necessary to have good spacing between letters to compensate for the merging of strokes in perspective view and crowding, taking into consideration the perceived width of the s trokes and the letters due to irradiation and chromatic aberration.
The magnitude of crowding decreases with the increase in the separation between adjacent characters, a simple way to minimise crowding in the text is to increase the spacing between adjacent characters.
The spacing should not cross a certain threshold, beyond which it starts affecting the reading speed.
Make sure you choose a typeface with loose spacing instead of spacing it yourself manually. Since manual spacing works as a whole and applies to all letters, it tends to mess up with kerning and other optical adjustments done by the typeface designer.