UI Sprite very pixelated

I put a 1024x1024 texture as a crosshair in my unity project, and shrunk it down a little, and now it looks like this:

The crosshair is actually supposed to look like this:

What happened?

I think your image is too big considering your actual display. If you resize your image 10x10 you are going to have the same result. You should keep your cursor image size at the same size you want it to be displayed. If you zoom on your sprite in the scene inspector your should see your original image.
Try to change the sprite filter mode and image max size, it will smooth your cursor for small resolution.