It's sense 4 here...
1: blow [WITH OBJECT] INFORMAL Spend recklessly:
they blew £100,000 in just eighteen months
...which is effectively a "variant" of sense 27 here...
2: blue (verb, tr) to spend extravagantly or wastefully; squander
Also note this closely-related slang usage...
3: to blow it to lose or waste something; to do very poorly or fail miserably.
It's worth pointing out that the example usage in #1 above could have appeared under #2 as
2a: they blued £100,000 in just eighteen months
My impression is that usage #2 is increasingly avoided precisely because it's being replaced by #1 and/or #3 - a replacement at least partly promoted by the fact that to blue is a "regular verb", so the present tense verb form sounds identical to the past tense of to blow (blew).
Native speakers are slightly disconcerted by the overlap in the spoken forms for the different tenses. And because both verbs (blow/blue) are slang/informal in these usages, many people only know them in spoken rather than written contexts. Consequently, there are lots of native speakers who've never really noticed exactly how to blue is used. And perhaps become uncertain about exactly how they might write it. The net result of this confusion is people increasingly avoid #2 above, even though it's probably the origin of usage #1.