Bitcoin held firm above $86,000 on Monday after weaker U.S. jobs data reduced the chances of an October rate hike, lending a boost to risk assets despite a stronger dollar.

The flagship cryptocurrency was up 0.2% at $86,024, after testing $87,000--which analysts called a key resistance level--in Asian trade.

Optimism rose in cryptocurrency markets after weaker-than-expected U.S. payrolls data on Friday reinforced expectations that the Federal Reserve will keep interest rates unchanged at its meeting this month.

The probability of an October Fed hike has fallen to below 20%, and bitcoin could be in for another strong week as a result, Coin Bureau's Nic Puckrin wrote in a note. "The next target is the psychologically significant $90,000, and $92,000 is the next resistance level to watch if it manages to break out of its current holding pattern," he said.

Meanwhile, the U.S. dollar rose close to the near 18-month peak reached overnight Sunday against a basket of currencies, as French fiscal concerns weighed on the euro.

Bitcoin is well-supported despite a strong dollar and elevated Treasury yields, but the next leg up depends on overall liquidity conditions, Zaye Capital Markets' Naeem Aslam wrote in a note.

"Weaker economic data only becomes sustainably bullish if it translates into lower yields, a softer dollar and continued ETF inflows," he said.

Bitcoin's recent rally marks a return to the debasement trade that began with Treasury Secretary Scott Bessent's August intervention in Treasury markets, Capital.com's Kyle Rodda said.

"That fundamental driver reveals a lot about Bitcoin's function and why it's remained relatively well supported recently," he said. "It's a trade on US policy largesse, an anti-fiat hedge and overall a portfolio diversifier." The directional picture for bitcoin is looking increasingly constructive and the lows of the cycle may have passed, Rodda added.