diff --git a/apps/api/src/common/throttler/throttler-storage.service.spec.ts b/apps/api/src/common/throttler/throttler-storage.service.spec.ts
new file mode 100644
index 0000000..b95f09d
--- /dev/null
+++ b/apps/api/src/common/throttler/throttler-storage.service.spec.ts
@@ -0,0 +1,257 @@
+import { describe, it, expect, beforeEach, vi, afterEach, Mock } from "vitest";
+import { ThrottlerValkeyStorageService } from "./throttler-storage.service";
+
+// Create a mock Redis class
+const createMockRedis = (
+  options: {
+    shouldFailConnect?: boolean;
+    error?: Error;
+  } = {}
+): Record<string, Mock> => ({
+  connect: vi.fn().mockImplementation(() => {
+    if (options.shouldFailConnect) {
+      return Promise.reject(options.error ?? new Error("Connection refused"));
+    }
+    return Promise.resolve();
+  }),
+  ping: vi.fn().mockResolvedValue("PONG"),
+  quit: vi.fn().mockResolvedValue("OK"),
+  multi: vi.fn().mockReturnThis(),
+  incr: vi.fn().mockReturnThis(),
+  pexpire: vi.fn().mockReturnThis(),
+  exec: vi.fn().mockResolvedValue([
+    [null, 1],
+    [null, 1],
+  ]),
+  get: vi.fn().mockResolvedValue("5"),
+});
+
+// Mock ioredis module
+vi.mock("ioredis", () => {
+  return {
+    default: vi.fn().mockImplementation(() => createMockRedis({ shouldFailConnect: true })),
+  };
+});
+
+describe("ThrottlerValkeyStorageService", () => {
+  let service: ThrottlerValkeyStorageService;
+  let loggerErrorSpy: ReturnType<typeof vi.spyOn>;
+
+  beforeEach(() => {
+    vi.clearAllMocks();
+    service = new ThrottlerValkeyStorageService();
+
+    // Spy on logger methods - access the private logger
+    const logger = (
+      service as unknown as { logger: { error: () => void; log: () => void; warn: () => void } }
+    ).logger;
+    loggerErrorSpy = vi.spyOn(logger, "error").mockImplementation(() => undefined);
+    vi.spyOn(logger, "log").mockImplementation(() => undefined);
+    vi.spyOn(logger, "warn").mockImplementation(() => undefined);
+  });
+
+  afterEach(() => {
+    vi.clearAllMocks();
+  });
+
+  describe("initialization and fallback behavior", () => {
+    it("should start in fallback mode before initialization", () => {
+      // Before onModuleInit is called, useRedis is false by default
+      expect(service.isUsingFallback()).toBe(true);
+    });
+
+    it("should log ERROR when Redis connection fails", async () => {
+      const newService = new ThrottlerValkeyStorageService();
+      const newLogger = (
+        newService as unknown as { logger: { error: () => void; log: () => void } }
+      ).logger;
+      const newErrorSpy = vi.spyOn(newLogger, "error").mockImplementation(() => undefined);
+      vi.spyOn(newLogger, "log").mockImplementation(() => undefined);
+
+      await newService.onModuleInit();
+
+      // Verify ERROR was logged (not WARN)
+      expect(newErrorSpy).toHaveBeenCalledWith(
+        expect.stringContaining("Failed to connect to Valkey for rate limiting")
+      );
+      expect(newErrorSpy).toHaveBeenCalledWith(
+        expect.stringContaining("DEGRADED MODE: Falling back to in-memory rate limiting storage")
+      );
+    });
+
+    it("should log message indicating rate limits will not be shared", async () => {
+      const newService = new ThrottlerValkeyStorageService();
+      const newLogger = (
+        newService as unknown as { logger: { error: () => void; log: () => void } }
+      ).logger;
+      const newErrorSpy = vi.spyOn(newLogger, "error").mockImplementation(() => undefined);
+      vi.spyOn(newLogger, "log").mockImplementation(() => undefined);
+
+      await newService.onModuleInit();
+
+      expect(newErrorSpy).toHaveBeenCalledWith(
+        expect.stringContaining("Rate limits will not be shared across API instances")
+      );
+    });
+
+    it("should be in fallback mode when Redis connection fails", async () => {
+      const newService = new ThrottlerValkeyStorageService();
+      const newLogger = (
+        newService as unknown as { logger: { error: () => void; log: () => void } }
+      ).logger;
+      vi.spyOn(newLogger, "error").mockImplementation(() => undefined);
+      vi.spyOn(newLogger, "log").mockImplementation(() => undefined);
+
+      await newService.onModuleInit();
+
+      expect(newService.isUsingFallback()).toBe(true);
+    });
+  });
+
+  describe("isUsingFallback()", () => {
+    it("should return true when in memory fallback mode", () => {
+      // Default state is fallback mode
+      expect(service.isUsingFallback()).toBe(true);
+    });
+
+    it("should return boolean type", () => {
+      const result = service.isUsingFallback();
+      expect(typeof result).toBe("boolean");
+    });
+  });
+
+  describe("getHealthStatus()", () => {
+    it("should return degraded status when in fallback mode", () => {
+      // Default state is fallback mode
+      const status = service.getHealthStatus();
+
+      expect(status).toEqual({
+        healthy: true,
+        mode: "memory",
+        degraded: true,
+        message: expect.stringContaining("in-memory fallback"),
+      });
+    });
+
+    it("should indicate degraded mode message includes lack of sharing", () => {
+      const status = service.getHealthStatus();
+
+      expect(status.message).toContain("not shared across instances");
+    });
+
+    it("should always report healthy even in degraded mode", () => {
+      // In degraded mode, the service is still functional
+      const status = service.getHealthStatus();
+      expect(status.healthy).toBe(true);
+    });
+
+    it("should have correct structure for health checks", () => {
+      const status = service.getHealthStatus();
+
+      expect(status).toHaveProperty("healthy");
+      expect(status).toHaveProperty("mode");
+      expect(status).toHaveProperty("degraded");
+      expect(status).toHaveProperty("message");
+    });
+
+    it("should report mode as memory when in fallback", () => {
+      const status = service.getHealthStatus();
+      expect(status.mode).toBe("memory");
+    });
+
+    it("should report degraded as true when in fallback", () => {
+      const status = service.getHealthStatus();
+      expect(status.degraded).toBe(true);
+    });
+  });
+
+  describe("getHealthStatus() with Redis (unit test via internal state)", () => {
+    it("should return non-degraded status when Redis is available", () => {
+      // Manually set the internal state to simulate Redis being available
+      // This tests the method logic without requiring actual Redis connection
+      const testService = new ThrottlerValkeyStorageService();
+
+      // Access private property for testing (this is acceptable for unit testing)
+      // eslint-disable-next-line @typescript-eslint/no-explicit-any
+      (testService as any).useRedis = true;
+
+      const status = testService.getHealthStatus();
+
+      expect(status).toEqual({
+        healthy: true,
+        mode: "redis",
+        degraded: false,
+        message: expect.stringContaining("Redis storage"),
+      });
+    });
+
+    it("should report distributed mode message when Redis is available", () => {
+      const testService = new ThrottlerValkeyStorageService();
+      // eslint-disable-next-line @typescript-eslint/no-explicit-any
+      (testService as any).useRedis = true;
+
+      const status = testService.getHealthStatus();
+
+      expect(status.message).toContain("distributed mode");
+    });
+
+    it("should report isUsingFallback as false when Redis is available", () => {
+      const testService = new ThrottlerValkeyStorageService();
+      // eslint-disable-next-line @typescript-eslint/no-explicit-any
+      (testService as any).useRedis = true;
+
+      expect(testService.isUsingFallback()).toBe(false);
+    });
+  });
+
+  describe("in-memory fallback operations", () => {
+    it("should increment correctly in fallback mode", async () => {
+      const result = await service.increment("test-key", 60000, 10, 0, "default");
+
+      expect(result.totalHits).toBe(1);
+      expect(result.isBlocked).toBe(false);
+    });
+
+    it("should accumulate hits in fallback mode", async () => {
+      await service.increment("test-key", 60000, 10, 0, "default");
+      await service.increment("test-key", 60000, 10, 0, "default");
+      const result = await service.increment("test-key", 60000, 10, 0, "default");
+
+      expect(result.totalHits).toBe(3);
+    });
+
+    it("should return correct blocked status when limit exceeded", async () => {
+      // Make 3 requests with limit of 2
+      await service.increment("test-key", 60000, 2, 1000, "default");
+      await service.increment("test-key", 60000, 2, 1000, "default");
+      const result = await service.increment("test-key", 60000, 2, 1000, "default");
+
+      expect(result.totalHits).toBe(3);
+      expect(result.isBlocked).toBe(true);
+      expect(result.timeToBlockExpire).toBe(1000);
+    });
+
+    it("should return 0 for get on non-existent key in fallback mode", async () => {
+      const result = await service.get("non-existent-key");
+      expect(result).toBe(0);
+    });
+
+    it("should return correct timeToExpire in response", async () => {
+      const ttl = 30000;
+      const result = await service.increment("test-key", ttl, 10, 0, "default");
+
+      expect(result.timeToExpire).toBe(ttl);
+    });
+
+    it("should isolate different keys in fallback mode", async () => {
+      await service.increment("key-1", 60000, 10, 0, "default");
+      await service.increment("key-1", 60000, 10, 0, "default");
+      const result1 = await service.increment("key-1", 60000, 10, 0, "default");
+
+      const result2 = await service.increment("key-2", 60000, 10, 0, "default");
+
+      expect(result1.totalHits).toBe(3);
+      expect(result2.totalHits).toBe(1);
+    });
+  });
+});
diff --git a/apps/api/src/common/throttler/throttler-storage.service.ts b/apps/api/src/common/throttler/throttler-storage.service.ts
index 1977b03..1df4d65 100644
--- a/apps/api/src/common/throttler/throttler-storage.service.ts
+++ b/apps/api/src/common/throttler/throttler-storage.service.ts
@@ -53,8 +53,11 @@ export class ThrottlerValkeyStorageService implements ThrottlerStorage, OnModule
       this.logger.log("Valkey connected successfully for rate limiting");
     } catch (error) {
       const errorMessage = error instanceof Error ? error.message : String(error);
-      this.logger.warn(`Failed to connect to Valkey for rate limiting: ${errorMessage}`);
-      this.logger.warn("Falling back to in-memory rate limiting storage");
+      this.logger.error(`Failed to connect to Valkey for rate limiting: ${errorMessage}`);
+      this.logger.error(
+        "DEGRADED MODE: Falling back to in-memory rate limiting storage. " +
+          "Rate limits will not be shared across API instances."
+      );
       this.useRedis = false;
       this.client = undefined;
     }
@@ -168,6 +171,46 @@ export class ThrottlerValkeyStorageService implements ThrottlerStorage, OnModule
     return `${this.THROTTLER_PREFIX}${key}`;
   }
 
+  /**
+   * Check if the service is using fallback in-memory storage
+   *
+   * This indicates a degraded state where rate limits are not shared
+   * across API instances. Use this for health checks.
+   *
+   * @returns true if using in-memory fallback, false if using Redis
+   */
+  isUsingFallback(): boolean {
+    return !this.useRedis;
+  }
+
+  /**
+   * Get rate limiter health status for health check endpoints
+   *
+   * @returns Health status object with storage mode and details
+   */
+  getHealthStatus(): {
+    healthy: boolean;
+    mode: "redis" | "memory";
+    degraded: boolean;
+    message: string;
+  } {
+    if (this.useRedis) {
+      return {
+        healthy: true,
+        mode: "redis",
+        degraded: false,
+        message: "Rate limiter using Redis storage (distributed mode)",
+      };
+    }
+    return {
+      healthy: true, // Service is functional, but degraded
+      mode: "memory",
+      degraded: true,
+      message:
+        "Rate limiter using in-memory fallback (degraded mode - limits not shared across instances)",
+    };
+  }
+
   /**
    * Clean up on module destroy
    */