Pauli exclusion principle is violated here. If the matter was being compressed to such an extent, we would soon have black holes within black holes.
The schwarzschild radius for earth is about 9 mm, so after the matter on earth was compressed below that, it would turn into a black hole, but the same would happen for the entire solar system at that point.
Another thing about space being a constant size doesn't agree with your assumption that we are inside a black hole.
If that was the case, why do the black holes form, if not by the compression of space? Black holes are anomalies of relativity which are described as turning the geometry of space to a conical shape. As opposed to a normal gravitational sphere of most round objects.
Black holes somehow stop collapsing and exert the same gravitational influence, which wouldn't be the case if the matter inside was exponentially being compressed.
So we have to assume exponential compression as the rate of expansion of the universe is exponential as well.
There would be a center of gravity in your universe, which isn't proven to exist. As there would be a place with the most matter inside a black hole and following that, the contraction of the universe wouldn't be equal to the expansion which is the same for every point in the universe regardless of existing physical conditions.
Also your idea assumes that there is no theoretical limit to how much anything can be compressed physically, without compressing the space, so there is no planck lenght or any other lenght which is a minimal magnitude in your universe.
In the end the whole idea rests on what we don't know about the black holes and about the nuclear and below physics.