It’s not even gif. This is animated png. Just rename the extension gif to png and upload the picture! But it works with with not all
The problem of GIFs not being able to be set is a bug in this version of Discourse. The reason mine works is because I set my avatar prior to this version. 
This is clever way to workaround the problem though!
I am aiming to upgrade the Discourse version next week, and the latest version should fix the problem.
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you require regular to use animated display pictures