What's wrong with this cable?
There are two problems.
The larger problem is that the level shifter is not suitable for I2C communications. It has built-in rise time acceleration. A much simpler level converter is more suitable for I2C.
The smaller problem is that the flat cable wiring has SDA and SCL next to each other, which will enable crosstalk between the wires.
The rise time acceleration combined with crostalk causes the rise time accelerator to cause SCL risin edges to couple to SDA which causes the extra large spikes seen on SDA.
The extra spikes should not be present on the SDA.