There are two possibilities:
The OS is displaying the image file incorrectly.
The image file itself is corrupt.
If you can find an application that uses different routines to display the image file, then you may be able to rule out the first option, if you can get the image to display correctly in a third-party app.
Otherwise, it's an issue for the ...
Why not move it first and then change the setting?
At one time, I needed to keep my dock updated with something that changed frequently. I just used a corn job to periodically replace the dock’s plait with a saved copy. That would presumably only help with things that stay in the dock, though.