diff --git a/docker-compose-env-var-fallback-volume/README.md b/docker-compose-env-var-fallback-volume/README.md
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+# Docker Compose - Environment Variable Fallback Volume
+
+Reproduces [issue #8854](https://github.com/coollabsio/coolify/issues/8854): the "Convert to file" button in Persistent Storage UI fails for volume paths using variables with fallback values (`${VAR:-./path}`).
+
+## How to reproduce
+
+1. Deploy this as a **Docker Compose** application from this Git repository.
+2. Go to the **Persistent Storage** tab.
+3. The `${CONFIG_FILE:-./default-config.yaml}` mount is listed as a directory.
+4. Click **"Convert to file"** on that mount.
+5. Expected: converts to file. Actual: throws `Invalid storage path: contains forbidden character '${' (variable substitution with potential command injection)`.
diff --git a/docker-compose-env-var-fallback-volume/default-config.yaml b/docker-compose-env-var-fallback-volume/default-config.yaml
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+++ b/docker-compose-env-var-fallback-volume/default-config.yaml
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+server {
+    listen 80;
+    server_name localhost;
+
+    location / {
+        root /usr/share/nginx/html;
+        index index.html;
+    }
+}
diff --git a/docker-compose-env-var-fallback-volume/docker-compose.yaml b/docker-compose-env-var-fallback-volume/docker-compose.yaml
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+++ b/docker-compose-env-var-fallback-volume/docker-compose.yaml
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+services:
+  web:
+    image: nginx:alpine
+    volumes:
+      - type: bind
+        source: '${CONFIG_FILE:-./default-config.yaml}'
+        target: /etc/nginx/conf.d/custom.conf
+        read_only: true