CRJ-200 First Officer reported receiving a gear warning when the pilot flying set an incorrect altitude resulting in a descent below the pattern altitude before initiating an altitude recovery after the aircraft warning. The Pilot Flying performed a recovery and continued the approach to a landing.

Narrative

While entering the left downwind for Runway XX at ZZZ for the visual approach; PF (Pilot Flying) selected the incorrect altitude. 1800 ft. MSL was selected instead of 2800 ft. MSL as briefed (1500 ft. AGL). PM (Pilot Monitoring) acknowledge the selected altitude without noting the deviation. Both pilots were focused on keeping track of the 4 VFR aircraft operating around the airfield. As the aircraft descended; the gear horn sounded. PF quickly disconnected the autopilot; added thrust; stowed spoilers; and climbed to 2800 ft. MSL. The flight continued into the downwind and proceeded to a 5 mile final for Runway XX and landed without further issue.Incorrect altitude was selected. Both pilots became distracted by keeping track of multiple VFR aircraft in the vicinity of the uncontrolled airport. Traffic included an aircraft departed Runway XX; aircraft holding short of Runway XX; aircraft inbound from the south setting up for an approach to Runway YY; and a helicopter conducting right traffic to Runway ZZ.Ensure that cross-checked altitude matches briefed altitude; and verify altitude selection makes sense when entering the downwind based on airport elevation.