For those who have been reading my coverage of the cryptocurrency Bitcoin, you might have noticed that there isn’t actually a “Bitcoin is Not Dead Part I.” This is because in spite of people repeatedly calling out the currency as having failed in the past, nobody has ever successfully argued why it had died (and obviously it didn’t) although that doesn’t stop technology pundits like the ever-popular Dvorak from constantly declaring its wholesale failure.

Yet, the cryptocurrency and its ecology continue to sail on.

Jim at Bitcoinblogger has written up an excellent summary of the current round of “Bitcoin will fail” editorials by well-known technology pundits and why their observations fall short of the conclusion:

There is no denying that bitcoin has dropped in price, but the question is has it failed? Mr. Dvorak compares bitcoin to other failed currencies including Beenz, sponsored by Oracle dictator Larry Ellison, and Flooz a currency sponsored by Whoopi Goldberg. What Mr. Dvorak fails to realize is that Flooz and Beenz are corporations, central authorities that control the existence and value of their monetary units they have created. If the corporation fails, perhaps by filing for bankruptcy, by dissolution, or even by, heaven forbid, a nuclear strike from a war then the currency will fail. Bitcoin, however, has no central authority and because it is decentralized it cannot fail. Bitcoin is based on a peer-to-peer (P2P) network based on thousands of users running the bitcoin software client. If one were to attempt to stop the proliferation of bitcoin one could argue the entire Internet would have to be stopped.

The reason why the bitcoin market has fallen in value is somewhat obvious: I contented that we’ve seen a value bubble akin to a bout of Tulip Mania.

Interesting enough, tulip mania didn’t suddenly devalue tulip bulbs (in fact, people still plant the lovely flowers in gardens across the world.) It just showed that any commodity can find itself in sudden popularity and get greatly overvalued by interested parties only to see a decline in that value again without being devalued into dust. Bitcoin isn’t a fiat currency; it’s a virtual commodity that limits its own value pool via mathematical laws. As Jim mentions above, a fiat currency (or one dependent on a central authority like a government or corporation) will burn down when the central authority vanishes; bitcoins have no central authority.

The value of bitcoins are still falling and exchanges are closing, but these by no means argur the end of Bitcoin. The market and ecology of the bitcoin is volatile and contains a thriving, albeit percentage-small, culture that’s developing technology for it and actively trading in the currency.

If we want to show the death of bitcoin, first pundits will have to demonstrate people have stopped trading in the currency. A decline in value is not a signal of this. Perhaps this would be true, if we saw a sudden drop in overall trade volume or a sudden decline in the number of people participating in the marketplace; but we haven’t seen that. Less-valued bitcoins just means that people can buy more of them and trade in them more easily.

During the month of January 2011, bitcoins ran for around $0.60. Even after the staggering 90% decline in value, bitcoins still value at nearly $3. Even with the giant bubble in the middle, that’s nearly a year-long rise in value. Along the way, Bitcoin gained a great deal of popular exposure, it continues to have technologies built around it, and the community has gained momentum.

I don’t know about you, but like Jim, I can’t agree with Mr. Dvorak on this one.