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 2.1% at $86,410, after reaching a one-week high earlier in the day, as optimism returned to cryptocurrency markets following more dovish Federal Reserve comments.

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

Jefferson's comments are the latest from a Fed official to signal that the central bank may delay raising interest rates beyond the October meeting. New York Fed President John Williams said Tuesday that the central bank could wait until December before raising interest rates again.

Meanwhile, investors are looking towards U.S. nonfarm payrolls data for September due later Friday. The data will be important in adjusting expectations for the Federal Reserve's future interest rate decisions, said Antonio Di Giacomo, a senior market analyst at XS.com, in a note. A strong job print increases the likelihood that the Fed will raise interest rates, which tends to weigh on non-yielding assets such as bitcoin.

"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 a summer during which bitcoin traded broadly below $65,000, 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 high government deficits could erode the value of fiat currencies, along with regulatory uncertainty.