Bitcoin breached $86,000 on Friday as expectations of an imminent U.S. interest-rate hike ease, boosting risk assets such as cryptocurrencies.

The flagship cryptocurrency was up 2.6% at $86,864, after reaching a one-week high earlier in the day, as optimism returned to cryptocurrency markets following weak U.S. payrolls data and dovish Federal Reserve comments. The data reinforces expectations that the Federal Reserve will keep interest rates unchanged at its meeting this month. A cooler job print tends to provide a boost to nonyielding assets such as bitcoin.

Fed vice chair Philip Jefferson said Thursday that the central bank might need more time to gauge the direction of the economy before it makes any further rate adjustments.

"Softer labor data could reduce expectations for further tightening, weaken yields and improve the environment for renewed [bitcoin] exchange traded fund inflows," Zaye Capital Markets analyst Naeem Aslam said in a note.

After trading broadly below $65,000 during the summer, the digital currency has begun to recover and optimism is picking up again among institutional buyers. Citi boosted its 12-month bitcoin target price to $113,000 from $82,000 amid renewed investor concern that large government deficits could erode the value of fiat currencies, along with regulatory uncertainty.