Bitcoin traded below $84,000 on Thursday, giving up gains from a spike in response to cooler-than-expected inflation data, as stubbornly high U.S. Treasury yields weigh on risk assets.

The flagship cryptocurrency was 0.6% higher at $83,183 on Thursday. Bitcoin had briefly spiked above $85,000 on Wednesday--fueled by a positive reaction to the Federal Reserve's latest inflation figures--before reversing gains as Treasury yields hit fresh multidecade highs.

Meanwhile, the dollar rose to three-month high against a basket of currencies on Thursday, which tends to pressure risk assets including crypto.

The Federal Reserve's preferred inflation gauge showed a significant slowdown in price increases over the 12 months through August on Wednesday. A softer-than-expected inflation reading tends to temper investor expectations for further interest-rate hikes, boosting risk assets. But bitcoin's bounce was short-lived as the 10-year Treasury yield hit its highest level since May 2002, at 5.304%.

Flows into cryptocurrency funds remain subdued this week, with J. P. Morgan estimating that week-to-date flows into crypto exchange-traded products total just $123 million so far. Last week clocked the biggest inflows recorded all year, at over $3.2 billion.

Institutional flows matter because leverage has already been reduced across derivatives markets, Zaye Capital Markets Chief Investment Officer Naeem Aslam wrote in a note.

"The next sustainable move increasingly depends on real spot demand rather than speculative positioning alone," he added.