To enable Markdown view click Settings -> Markdown
This plugin is not designed for you to write Markdown and it format that markdown with styling. So you can't expect to type **blah** and expect to see blah in bold. You can however type blah, set it as bold and then click "Show as Markdown" and it will show **bold**. I will not be adding support for supporting typing in markdown which will render to a style because it will be impossible to handle character control.
Paste the below into your settings.
"ep_markdown_default": true,
Etherpad 1.8.1