Should Libya block Internet traffic, as Egypt did, it will not affect http://bit.ly or any .ly domain.
For .ly domains to be unresolvable the five .ly root servers that are authoritative *all* have to be offline, or responding with empty responses. Of the five root nameservers for the .ly TLD: two are based in Oregon, one is in the Netherlands and two are in Libya.
via Quora – What will happen to http://bit.ly links when Gaddafi shuts down the Internet in Libya due to protests?. I use their bit.ly pro service to for my short links through http://jty.me/.