In this paper we have studied the behavior of space charge dominated transverse beam envelopes in a compact cyclotron along the accelerated orbits using the coupled beam envelope equations and assuming the beam as a uniform ellipsoidal bunch. A detailed investigation on the amplitude growth and oscillations in the beam envelopes has been carried out by changing the input beam sizes and phase ellipse orientations at the injection in both transverse planes. We have developed a method to obtain the parameters of a matched beam with space charge including the effect of acceleration in a cyclotron in linear approximation for a given beam current and emittance. We have also estimated the maximum beam current that can be transported through a given focusing channel of a compact cyclotron.