Gift card

Apple Cash and your Apple ID balance are 2 different things. They are not connected.

You can transfer balance from Apple Cash to your Apple ID's balance, but the reverse is not possible.

You have $10 dollars in gift card credit balance on your Apple ID.

You have no balance on your Apple Cash account.

Link 1-> Manage your Apple Cash account - Apple Support

Link 2-> Check your Apple ID balance - Apple Support

Looks like that particular in-app purchase does not allow payment with the gift card balance, or there is something preventing the purchase. As I said, make sure you have a verified payment method. If they stopped being verified for any reason it will cause issues with purchases even if you do have balance in your account.

Link-> What you can buy with your Apple ID balance - Apple Support

Link-> Can’t buy in app items using gift cards - Apple Community

You have$10 in your account. How much is the item you wish to buy? Do note prices in the iTunes and & App stores are before taxes. So if you are trying to buy a $9.99 item, then you need to add the sales tax as defined in your region to the price.

If the price of the item + taxes is more than $10, it won't let you buy it.

And what happens when you confirm with the side button?

If it's asking you to verify your payment method, then you need to do that. It won't charge it since there's enough balance to cover the purchase.

You must have a verified payment method. Once it has been verified, it can be removed and will not ask for it again.