Icons are 512x512 in size, so your image is being scaled down to fit within this area. The correct solution to this would be to create a new image of a different size - preferably 512x512, so it fits nicely and doesn’t need to be downscaled.
The game Icon MUST be 512x512, unless you want it like cropped. I suggest keeping the current one and set it as a thumbnail, and crop a new one (copy of it), move the text and it would look perfect for your game.