The problem is that you're not using a GeoTiff. A GeoTiff is a Tiff file that has geographical information in the header of the file (geographic location/projection/datum, scale, min/max elevations etc).
Changing the format of a .png to a .tif in Photoshop does not create this additional information.
Please refer to the link to the documentation for preparing DTM data.
As for source data, this will depend on where in the world you're looking to create a landscape for. High resolution DTM data is collected and distributed by governments and commercial organisations. There are no worldwide, high-resolution providers of DTM data, so you need to do a little research to find what you're looking for.
Terrain.party uses terrain data from the Shuttle RADAR Topographic Mission (STRM) and provides a nominal resolution of 10m/pixel in the US with 30m/pixel resolution around the rest of the world. Terrain.party strips the geographical information in this data and allows you to download an image of it (a .png file).
You can download the actual SRTM data from here: https://dwtkns.com/srtm30m/ by 1 degree square areas. You can then follow the instructions in the link provided previously to clip it to the area you want to create your landscape for and export it to GeoTiff.
Hope that helps!