Alright, kinda fixed it but not in 100%, there is still some flickering but it’s manageable. Worst part of flickering at the beginning when the character teleported up is fixed. For now it’s good enough.
The problem was that I initially updated the capsule component always at height + (0,0,90), which caused the mesh to teleport up. I’ve fixed it by calculating the distance from the ground on each tick and inversely decreasing the Z location. Here is the full BP; maybe someone will have the same problem.
Cheers!