Help - My sprites are getting distorted when zooming in

This happens in both scene and game mode. When I zoom in/out my smaller sprites get distorted and change dimensions quite heavily.

I’ve tried using pixel perfect camera, played around with the sprites settings etc. but nothing seems to help. What could be reason this is happening? Is it because I scaled the sprites down using their gameobjects transform? They are currently set to x0.1 scale

I can provide more details if neccessary. Just tell me what you need to know