Blood parrots look pretty deformed until you put them next to fancy goldfish
I don't buy dyed fish because I don't like those sorts of colours, but injecting fish with dye or stripping off the slime coat and giving them dye dips doesn't seem any worse to me than the usual treatment and general short, sad life of most aquarium fish. It's hard to verify how "painful" that is, since fish have a different sort of nervous system from ours. Probably significantly less painful than declawing cats and whacking the tails and parts of ears off dogs.
It's a trade where we buy wild-caught fish who die like flies on the way to the LFS, cheap common fish like guppies, platies and mollies are exterminated in droves by beginner aquarists, large, fast-swimming schooling fish live their lives in ones and twos with hardly enough space to turn around... almost everything that happens to aquarium fish is bad. The number of fish in the trade who actually live a normal lifespan must be less than one in a thousand and they way they die is almost always unpleasant... slowly drying up on the rug, stewing in ammonia, suffocating, boiling, having fins chewed off, poisoned with medication, succumbing to ich, well you get the picture. So you have a nice tank of fish who are healthy and cared for... it's still your dollars that supports a trade that kills and tortures more fish than it ever helps. The breeding of freaks is only a tiny part of that trade.
One thing about blood parrots, I rarely see them mentioned in "my fish is sick" posts, they cost enough to make them poor starter fish, and their owners seem to adore them and take care of them. If I was going to start on a crusade against fish cruelty, blood parrots would be far down my list. They have it better than most. Just my 2 cents.