If you go to the about:config page you can edit browser.tabs.tabMinWidth down to 50 (default is 76) which lets you fit a bit more
If you want more than that it’s possible by editing the userchrome:
https://old.reddit.com/r/firefox/comments/zda0ov/can_i_get_below_50_tab_width/
Modifying userchrome is admittedly difficult if you’re not a developer… but not out of reach if you’re able to follow a guide.

I don’t really like this approach because it’s not personally customizable and wouldn’t be very straightforward. I’d prefer something similar to multireddits where I can make a collection of similar communities.

Out of curiosity, what’s the disk usage from hosting your own instance like? My concern with self hosting is it’ll quickly run out of control. I don’t want to dedicate hundreds of gigabytes to a lemmy instance.